Stock traders were ready with “band, baaja” on Budget Day but the “baaraat” (party) came a day late as market participants were able to grasp the full implications of Nirmala Sitharaman’s no-compromise Budget only the next day. Sensex jumped over 1,400 points on Friday, while Nifty crossed its previous peak of 22,124, also referred to as the Ram Mandir peak in Street parlance, before paring some gains in the second half of the session.

“The market probably looked at global clues and fell yesterday. The Interim Budget was way beyond expectations of the market on fiscal consolidation. It still delivered inclusive growth and infrastructure investment. Net-net this is citizen’s pride and peer’s envy vote-on-account,” said Dalal Street veteran Nilesh Shah of Kotak Mutual Fund.

Against the market expectation of 5.3% of GDP as the fiscal deficit target for FY25, the Budget presented a fiscally more prudent target of 5.1%. As Sitharaman managed to meet fiscal discipline without compromising on capex thrust (Rs 11.11 lakh crore), brokerages welcomed the move saying India is doing the right things.

Nifty, which ended 26 points lower on Budget Day, has been broadly stuck in the range of 21,200-21,900 for the last couple of weeks.

“The index was already consolidating and was looking for a breakout on either side. For Nifty to go above 22,000 now, we need some drastic positive news like rate cut or earnings growth,” Kranthi Bathini of WealthMills Securities said.One of the reasons behind today’s rally is attributed to the drop in G-Sec yields after the FM walked the path of fiscal prudence. “This means that the cost of funds will be cheaper. This will indirectly help the private sector,” Bathini said.Following the sharp decline in bond yields consequent to the net market borrowing which has been kept low at Rs 11.75 trillion, PSU bank stocks rallied up to 20% on Friday with PSB, PNB, Bank of India, and Indian Overseas Bank leading the upside momentum.The tight fiscal also increases the possibility of policy rate cuts by the RBI. Jefferies is building a 50 bps rate cut by the RBI in the second half of the calendar year.

HSBC analysts note that a confluence of several factors is favorably positioned and that the Union Budget stance further reinforces this construct, potentially making 2024 a favourable year for Indian equities.

Budget stocks to buy

Investors are busy hunting for stocks in areas like solar, aquaculture, housing finance, PSU banks, etc.

Jefferies has listed out Tata Motors, Ashok Leyland, Home First, Aavas, Siemens India, Bharat Electronics, L&T, Power Grid, NTPC, JSW Energy, Dixon Tech, and Amber as Budget beneficiaries.

“FY25 Budget is fiscally tighter than market expectations, which is remarkable, given the upcoming elections, with no new social scheme announced or expanded. This also possibly reflects the govt’s confidence in re-election. A 16% jump in capex is better than our expectations, clearly highlighting govt priorities. It’s a positive for interest rate sensitives like real estate, autos, PSU banks, and small pvt banks. Incremental negative for rural plays including staples,” Jefferies said.

HSBC said the measures announced in the budget clearly put infrastructure-linked companies (capital goods, and cements) as the likely key beneficiaries.

“The travel and related sectors also stand to gain from the consistent push for travel infrastructure. Although not directly, lower government borrowings could lead to easier liquidity, which would be incrementally positive for banks and NBFCs’ NIMs. OMCs are likely to benefit from higher capital support. There is also a notable increase in the PLI scheme for the pharma sector, which could benefit select companies,” HSBC said.

Axis Securities has picked SBI, Bank of Baroda, Ultratech cement, Nestle, Britannia, Amber Enterprises, Praj Industries, PNC Infra, Ahluwalia Contracts, Jindal Stainless, Tata Power, Waaree Renewables and Coromandel International among its list of Budget beneficiaries.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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