Stock market reacts cautiously to Union Budget 2015-16

With the market open on a Saturday for the Union Budget, experts were predicting a volatile market and it sure did not disappoint. The benchmark index, Sensex, opened at 29,411.33 points and closed at 29,361.50 points, registering a marginal gain of 0.48%. However, the difference between the day's high and low was 678.3 points.

By the time the Budget ended, the Sensex had briefly slipped into the red but managed to recover. The best performing sector of the day was S&P BSE Bankex, which gained 3.27%, followed by S&P BSE Healthcare at 2.03%. Meanwhile, the worst performing sector was S&P BSE FMCG which fell 4.09%, followed by S&P BSE Consumer Durables, which fell 2.05%.

Sharing the views on the Budget, Sanjay Chawla, chief investment officer, Baroda Pioneer Mutual Fund says, "The Budget manages a fine balance between fiscal prudence and has number of levers to enable growth. The fiscal deficit of 3.9% was a bit disappointing after fiscal prudence path that was spelt out last year. Providing a vision for long-term taxes, with corporate taxes being reduced from 30% to 25%, GAAR being deferred and attempts to boost rural income are very encouraging."

However, not everyone was convinced with the Budget. Arvind Sethi, MD & CEO, TATA Asset Management says, "Just as the RBI has been 'bullet proofing' the external balance sheet, we were hoping that the FM would take steps to do that for the governments balance sheet. In that context the Budget was disappointing because it assumes a questionable growth rate, relies too heavily on divestment to meet fiscal targets, does not address the revenue deficit issue head on and leaves the good things for the future."

Among various other announcement, the Finance Minister announced that Forwards Market Commission (FMC), the regulator for commodity futures markets will be merged with Sebi, the regulator for securities market in India. The proposal was earlier recommended by BN Srikrishna, head of Financial Sector Legislative Reforms Commission. The consolidation of market regulation and supervision of SEBI was also recommended by Raghuram Rajan committee on financial sector reforms in 2009 itself.

Commenting on the merger, Jayant Manglik, president, retail distribution, Religare Securities says, "The effective merger will probably take several months as it may have to be referred to a Standing Committee of the Finance Ministry." As an autonomous regulator, Sebi will be prove to be a big advantage for the commodities industry going forward. It will also help in faster integration of the commodities futures industry into the financial trading landscape. "I am sure Sebi will also be well equipped to handle the new challenges which come with the introduction of a new product line under its regulatory oversight," he added.

Sanjay Kaul, MD &CEO, National Collateral Management Services, concurs with Manglik. "The announcement to merge the Forward Markets Commission (FMC) with SEBI is a game changer. This step will lead to improve credibility, transparency and regulation of the commodity futures market. It is hoped that this will pave the way for participation of banks and other financial institutions in the commodity futures market," he says.

Commenting on investment opportunities for retail investors, Vijay Singhania, founder, Trade smart online says, "A sharp pre-Budget rally discourages any pressing need to buy right now. However, one should bottom fish and start buying into select sectors like IT, Banking, Infrastructure and Power".

The best performing stocks, as mentioned on the BSE website on the Budget day, were Axis Bank which rose 9.03%; followed by Muthoot Finance (8.34%), Sun Pharma Advanced Research Company (7.74%), Hathway Cable & Datacom (7.18%) and IndusInd Bank (+6.65%). Meanwhile, among the top losers were ITC (8.27%); Punj Lloyd (5.41%); Jaiprakash Power Ventures (5.14%); Shree Cement (4.80%); and Rallis India (4.80%).