Tax sops, Capex push, Adani rout: Why Sensex swayed 2,000pts on Budget day?

Budget 2023: Analysts said the Budget push in the capital expenditure (capex) outlays across sectors and the income tax relief have been the top boosters to support the domestic economy

The growth-oriented and consumer-friendly proposals announced in the Budget 2023-24 bolstered spirits of Dalal Street investors on Wednesday sending the BSE Sensex 1,223 points higher to its intra-day high. Though this was soon followed by a sudden slump led by losses in Adani group shares and PSU banks. 

The BSE Sensex moved 1,956 points between the highest and lowest points of the day. It tanked 733 points to the day's low. Finally, the index recovered to close 158 points higher at 59,708. The NSE Nifty ended 46 points lower at 17,616.  

Adani Enterprises and Adani Ports sank 27 per cent and 18 per cent, respectively on the Nifty, after Credit Suisse's private bank stopped accepting bonds of the group companies as collateral for margin loans, Bloomberg reported. The concerns over the group's debt tanked the PSU Bank index 6 per cent. 

"The market failed to hold gains as banks and Adani group stocks came under pressure in addition to a correction in insurance stocks due to the tax provision introduced on policies with over Rs 5 lakh premium. Though, the budget has delivered on all the expectations very well. In the short term, we expect the markets to move higher on the back of pro-growth budget measures," said B Gopkumar, MD & CEO, Axis Securities.

Besides, analysts say that the Budget push in the capital expenditure (capex) outlays across sectors and the income tax relief to individuals have been the top boosters to support the domestic economy at a time when the global growth outlook remains uncertain.  

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This will have a larger multiplier effect on employment and growth and will support crowding in of still-lacking private capex, said Madhavi Arora, Lead Economist, Emkay Global. 

Besides, the capital gains tax provisions left unchanged is another positive for the markets, as per S Ranganathan, Head of Research, LKP Securities.

“The Budget is a pro-growth budget, which has met street expectations on fiscal prudence. It has put more money in the hands of consumers. Increased outlay towards energy transition, railways, affordable housing and urban infrastructure indicates the government’s resolve to push enablers for growth,” said Ranganathan. 

Let’s look at the key positive factors that hav improved market sentiment:

Capex push: The FY24 capital investment outlay of Rs 10 trillion is the highest ever and almost 3 times the allocation made in 2019-20. The new outlay will amount to 3.3 per cent of the gross domestic product (GDP). In FY23, the capex outlay was Rs 7.5 trillion. 

Across sectors, railways capex allocation has also been the highest ever at Rs  2.4 trillion, while a Rs 35,000 crore allocation has been announced towards green energy transition.

Tax bonanza: The Finance Minister also laid out the New Tax Regime for the new fiscal year, which will allow direct tax exemption up to an income of Rs 7 lakh per annum vs the earlier limit of Rs 5 lakh. Under the new regime, which remains optional, income tax slabs have also been remodelled with the lowest tax rate of 5 per cent on Rs 3-6 lakh slab and the highest rate being 30 per cent on annual income above Rs 15 lakh. Income of up to Rs 3 lakh will not invite any tax. 

“As the disposable income increases, the FMCG sector, which is battling inflation, gets a shot in the arm. BFSI sector also stands to gain as deposits and investments in insurance, and mutual funds will rise,” said Sanjay Moorjani, Research Analyst, SAMCO Securities.

Fiscal prudence: The government kept its fiscal deficit target of 6.4 per cent for FY23 intact meeting expectations while targeting a lower fiscal deficit estimate of 5.9 per cent of GDP for FY24. Finance Minister Nirmala Sitharaman reaffirmed the government's aim to bring the fiscal deficit to below 4.5 per cent by FY26.