Budget 2021 Live Updates: Sensex, Nifty Post Best Budget-Day Gains Since 1997
Catch Finance Minister Nirmala Sitharaman’s Union Budget 2021 decoded live here.
KEY HIGHLIGHTS
Budget Missing Clear Roadmap On Innovation, Says Pawan Goenka
The budget didn’t have a clear roadmap on how india will become an Innovation and R&D driven economy, says Pawan Goenka, MD & CEO, Mahindra & Mahindra
It was one of the five pillars in the budget but there wasn’t enough to create a roadmap, which is important for long term.
“For India to become aatmanirbhar, its own innovation is a must,” he said.
Speaking about the overall big numbers, the budget delivers on what most industry leaders had expected from the budget. It facilitates demand and the whole emphasis is on the growth. The ‘head and heart’ of the finance minister’s and those who made was in the right place.
There is not too much sector specific, but when GDP numbers go up all the sectors will benefitAll the expenditures are focused on economic growth and there are very few handouts that have been added, says Goenka.
On Simplification Of Regulations
- Hope government takes a very serious stand in simplifying regulations, says Goenka.
- Regulations creates an unnecessary burden on the industry and makes it non competitive in many aspects.
Urges Delay Of Scrappage Policy
- Pawan Goenka urges government to delay the upcoming regulations for the auto industry by 12 to 18 months, unless essential.
- Auto industry is currently bruised from BS6 norms and Covid impact
- We need little bit time before we get the burden of new regulations.
- We can’t afford more cost increase because it will make our business unviable.
'This Is A Bold Budget,' Says Uday Kotak
- ARC is an intermediate aggregate structure
- ARC will be less on ultimate resolution and more on nature of aggregator
- I don’t think stimulus on demand alone will help us without the supply side being addressed
- As you go for an aggressive borrowing program, this will require deft management between the government and RBI
- On the asset side DIF needs to get comfort that final end payer pays the money
- It is a transparent fiscal deficit
- Commend the government on keeping a stable tax regime
Finance Minister Nirmala Sitharaman's Press Conference
Key Highlights
- See opportunity for private sector to set up its own DFIs
- One sole DFI cannot meet India’s needs
- Partly-goverenment funded DFI with private capital should compete with private DFIs
- FY22 fiscal deficit will definitely be within 6.8%, may even be lower, as per DEA Secretary Tarun Bajaj
- Agriculture Infrastructure & Development Cess was introduced without having the end consumer pay more on any category.
- We will enter the global indices in the coming year for our borrowings: Economic Affairs Secretary Tarun Bajaj
Sensex, Nifty Erase Over 60% Of The Six-Day Drop
Moody's Views On The Union Budget
- Lasting effects of the pandemic will continue to pose downside risks to growth in the medium term.
- This risk is embodied in the negative outlook on India’s rating.
- Budget tries to strike balance between supporting growth and a modest deficit reduction.
- Improvements in tax compliance and monetisation targets may be difficult to achieve.
- Government has limited room to reduce spending without further weakening growth.
- Nominal GDP growth will remain critical for future deficit reduction.
PSU Bank Index Gains The Most In Over A Month
OMCs In Focus
The government has imposed an Agriculture Infrastructure and Development Cess of Rs 2.5 per litre on Petrol and Rs 4 per litre on Diesel in the Union Budget.
Details in the budget document reveal that the special excise duty on petrol was cut to Rs 11 per litre from Rs 12 per litre earlier while basic excise duty was cut to Rs 1.58 per litre from Rs 2.98 per litre.
Similarly, the special excise duty on diesel was cut to Rs 8 from Rs 9 per litre while basic excise duty was cut to Rs 1.8 per litre from Rs 4.83 per litre earlier.
Shares of Indian Oil are trading 1.6% higher at Rs 94.75 while those of BPCL and HPCL pared gains to trade little changed.
In Images: Finance Minister Nirmala Sitharaman's Third Budget
Markets Set For Biggest Budget-Day Gain Since 2001
- Nifty up 4% at 14,177
- Sensex up 4.2% at 48,220
- Nifty Bank up 6.7% at 32,617
- Nifty Midcap index up 2.7%
- Nifty Smallcap index up 1.4%
- India Volatility Index down 6.7% at 23.64
- PSU Bank index gains 6.2% while Realty index is up 4.7%
- Nifty Pharma is the only sectoral laggard; down 0.7%
- IndusInd Bank remains the top Nifty gainer; up 12% while ICICI Bank up 10.7%
- 44 out of the 50 index constituents gain
- UPL remains the top Nifty laggard; down 5.3%
- 1,264 stocks on the NSE trade with gains while 612 stocks decline
Indian benchmark Nifty 50 and Sensex indices had gained 4.3% on Feb. 1, 2001.
In Focus: ICICI Prudential
In order to rationalise taxation of Unit Linked Insurance Plans, Finance Minister Nirmala Sitharaman proposed to allow tax exemption for maturity proceeds of the ULIP having an annual premium of up to Rs 2.5 lakh.
"However, the amount received on death shall continue to remain exempt without any limit on the annual premium. The cap of ` 2.5 lakh on the annual premium of ULIP shall be applicable only for the policies taken on or after February 1, 2021," the minister said.
Further, in order to provide parity, the nonexempt ULIP shall be provided same concessional capital gains taxation regime as available to the mutual fund.
As per a Jefferies report on January 15, 2021, ULIPs comprised of 65% of ICICI Prudential's product mix.
Shares of ICICI Prudential gave up gains of as much as 6% to fall as much as 0.7% to Rs 477.7.
India Sees FY22 Total Subsidies At Rs 3.7 Lakh Crore
- India sees FY22 fertilizer subsidy at Rs 80,000 crore
- India sees FY22 petroleum subsidy at Rs 13,000 crore
- India to spend Rs 2.43 lakh crore on food subsidies in FY22
15th Finance Commission Report Recommends Lowering Fiscal Deficit To 4% By FY26
"In view of the uncertainty that prevails at the stage that we have done our analysis, as well as the contemporary realities and challenges, we recognise that the FRBM Act needs a major restructuring and recommend that the time-table for defining and achieving debt sustainability may be examined by a High-powered Inter-governmental Group involving the Union and State Governments," the 15th Finance Commission report said.
Finance Minister Nirmala Sitharaman today revealed that fiscal deficit for FY21 expanded to 9.5% of the GDP. The government is further targetting a fiscal deficit of 6.8% for FY22.
Nifty Banks Gains Most In Over Eight Months
Nifty Bank index gains the most in over eight months; up over 1,700 points.
Your Post Budget Reading List
- India Pegs FY22 Fiscal Deficit At 6.8%
- Finance Minister Announces New Health Scheme With Rs 64,180-Crore Outlay
- Capital Expenditure Hiked 34.5% To Rs 5.54 Lakh Crore In FY22
- National Infrastructure Pipeline Expanded To Cover 7,400 Projects
- India Sets Divestment Target Of Rs 1.75 Lakh Crore For FY22
- Government To Set Up Development Finance Institution
- Government Proposes Rs 20,000-Crore Bank Recapitalisation In 2021-22
Markets: Best Single-Day Gain In 10 Months
- Nifty up 3.4% at 14,093
- Sensex up 3.5% at 47,924
- Nifty Bank up 6% at 32,412
- Nifty Midcap index up 2%
- Nifty Smallcap index up 1.2%
- India Volatility Index down 8.2% to 23.26
- PSU Bank index also gains 6% while Auto index gains 3.2%
- Nifty Media and Nifty Metal indices up 2.8% each
- IndusInd Bank remains the top Nifty gainer; up 11.6% while ICICI Bank gains 10%
- 45 out of the 50 index constituents advance
- UPL remains the top Nifty laggard; down 6.6%
Sensex Rallies 3.5%; Nifty Nears 14,100
Indian equity markets saw its best single-day gain in ten months after Finance Minister Nirmala Sithatraman delivered her budget speech for the year. The benchmark Sensex Index was up 1,700 Points while the nifty Bank rose past the 14,000 mark.
Ahead of the budget, JP Morgan’s Sajjid Chinoy and Toshi Jain had argued that it’s possible for the government to deliver a budget that expands spending while simultaneously reducing the headline budget gap.
JP Morgan’s analysis said with GDP expected to rebound sharply in the coming fiscal, some of the tax revenues that were lost in the last two years can be recovered. If that is combined with a successful asset sale programme by the government, then the expenditure can be increased while keeping the deficit under control.
NHAI And PGCIL To Set Up INVITs To Attract Global Funds
- Monetising operating public infrastructure assets is a very important financing option for new infrastructure construction
- A national monetizing pipeline for brownfield assets will be set up
- NHAI and PGCIL have sponsored 1 InvIT each, to attract foreign investors
- 5 operational roads with est. enterprise value of Rs 5,000 cr being transferred to NHAI InvIT
- Transmission assets worth Rs 7,000 crore to be transferred to PGCIL InvIT
Government To Set Up A Development Financial Institution
Finance Minister Nirmala Sitharaman in the Union Budget announced a plan to introduce a bill for setting up a new Development Financial Institution.
The institution will have an initial capital of Rs 20,000 crore and it aims to have a lending portfolio of Rs 5 lakh crore over the next three years, the Finance Minister said.
Nifty Auto Index Spikes After FM Announces Scrappage Policy
Government Sets Aside Rs 35,000 Crore For Covid-19 Vaccine In FY22
The FY22 health and well-being spend has been pegged at 2.23 lakh crore, Finance Minister Nirmala Sitharaman said. Of this Rs 35,000 crore has been earmarked for the Covid-19 vaccine, she said.
The pneumococcal vaccine, limited to only 5 states at present, to be rolled out across the country Will avert more than 50,000 child deaths annually, informs Finance Minister .
India Proposes Voluntary Vehicle Scrappage Policy
- A voluntary scrappage policy for vehicles to be launched, aimed at reducing vehicular pollution
- Vehicles to undergo fitness test after 20 years for personal vehicles, 15 years for commercial vehicles
Government To Spend Rs 1.41 Lakh Crore For Urban Clean India Mission
- The Urban Swachh Bharat 2.0 Mission to be launched at outlay of Rs 1.41 lakh crore over 5 years, Sitharaman said.
- The Jal Jeevan Mission Urban to be launched at outlay of Rs 2.87 lakh crore
Government To Spend Rs 64,180 Crore On Healthcare Over Six Years
Finance Minister Nirmala Sitharaman announced the PM Atmabirbhar Swasth Bharat Yojana which will spend Rs 64,180 crore on primary, secondary and tertiary healthcare over a period of six years.
- This will be in addition to the National Health Mission.
- 17,000 rural and 11,000 urban health and wellness centres to be set up
- Integrated public health labs to be set up in each district, 3,382 block public health units in 11 states
Government To Announce Plan For India Self Reliance Program
- Wish to lay a vision for Atmanirbhar Bharat in Part A of BudgetThe proposals in
- Part A will further strengthen ‘sankalp’ of Atmanirbhar India
- FY22 budget proposals based on six focus areas
Government Prepared To Facilitate Economic Reset, Says Sitharaman
- So far only three times has a Budget followed a contraction in GDP
- This time the contraction in the economy is because of a global pandemic
- Government is fully prepared to support and facilitate economy’s reset
Sitharaman Recaps Policies Announced For Social Welfare Amid Pandemic
Finance Minister Nirmala Sitharaman began the Budget FY22 presentation by recapping some of the welfare policies announced by the Narendra Modi government for farmers, healthcare workers, etc amid the pandemic.
“The government stretched its resources to provide for the most vulnerable,” she said, adding that the policies are equivalent to five different budgets.
- The risk of not having a lockdown was far too high
- Government rolled out three Atmanirbhar packages with RBI measures up to Rs 27.1 lakh crore
- The Atmanirbhar packages accelerated our pace of structural reforms
- Fight against Covid-19 continues into 2021
- International and strategic relations are changing in post Covid-19 era
"Faith is the bird that feels the light and sings when the dawn is still dark" the Finance Minister said, quoting Rabindranath Tagore, adding that this moment in history is the dawn of a new era, where India is well-poised to be the land of promise and hope". This comes ahead of the West Bengal State elections in 2021.
Ashok Leyland January Sales Up 11%
- Overall sales at 13,126 vehicles Vs 11,850 vehicles
- Total M&HCV sales down 5% at 7,374 vehicles Vs 7,754 units
- LCV sales up 40% at 5,752 vehicles Vs 4,096 vehicles
- M&HCV truck sales up 29% at 6,554 vehicles Vs 5,072 vehicles
- M&HCV bus sales down 69% at 820 vehicles Vs 2,682 vehicles
Maruti January Sales Up 4.3%
- Total sales at 1,60,752 units
- Domestic sales up 2.6% at 1,48,307 units
- Exports up 29.3% at 12,445 units
- Passenger Car Sales down 6.9% at 1,03,435 units
January Manufacturing PMI At 57.7
India's Manufacturing Purchasing Managing Index for the month of January stood at a three-month high, at 57.7 as compared to 56.4 in December.
This was the sixth consecutive month of expansion and the highest reading since October 2020.
Output rose to 62.7 in January as compared to 60.8 in December, the highest reading since October 2020.
A reading above 50 indicates expansion while that below 50 indicates contraction.
Benchmarks Near The Day's High
- Benchmark indices trade at the day's high ahead of the Union Budget
- Nifty up 0.8% at 13,750
- Sensex up 1% at 46,753
- Nifty Bank up 1.8% at 31,111
- Nifty Midcap index down 0.1%
- Nifty Smallcap index up 0.1%
- India Volatility Index down 1.7% to 24.91
- Nifty Realty index gains 1.8% while PSU Bank index up 1%
- Media and Metal index gain 0.7% each
- Nifty Pharma is the top sectoral laggard; down 1%
- IndusInd Bank is the top Nifty gainer; up 8.4%
- UPL is the top Nifty laggard; down 8%
- 953 stocks on the NSE trade with gains while 802 decline
FM Nirmala Sitharaman Arrives At Parliament
Power Sector Reforms On The Anvil
The government is planning to spend as much as $41 billion on a new plan to revive regional electricity retailers, people with knowledge of the matter told Bloomberg.
This, after a previous attempt to stem losses at the utilities failed.
The combined loss at the nation’s power distribution companies, mostly controlled by provincial administrations, jumped 69% to 496.2 billion rupees in the year ended March 2019, the latest available data.
Earnings Reactions: IndusInd Bank Rises, UPL Declines
- IndusInd Bank: Gains as much as 8.3% to Rs 916.5. Biggest single-day gain in over two months. Top Nifty gainer.
- UPL: Falls as much as 8.1% to Rs 515. Down for the fourth straight day. Top Nifty laggard.
- Tata Motors: Falls as much as 2.4% to Rs 256.5. Down for the sixth straight day.
- ICICI Bank: Gains as much as 5.8% to Rs 568. Trades at a record high. Up for the third straight day.
- Tech Mahindra: Falls as much as 3.4% to Rs 928.2. Trades at the lowest in over a month. Down for the third straight day.
- Cipla: Falls as much as 5.6% to Rs 779.9. Down for the third straight day.
Highest January Sales For Escorts
- Overall sales up 48.8% to 9,021 units Vs 6,063 units
- Domestic sales up 45.6% to 8,510 units Vs 5,845 units
- Exports up 134.4% to 511 units Vs 218 units
- Highest ever sales in January
- Tractor market continues to remain strong on the back of positive macros and strong rural cash flows
- Supply-side situation is normalisimg and no longer expected to be a bottleneck
- Rising inflation continues to be a worry
For more on the January auto sales, click here.
Sensex, Nifty Open Higher Ahead Of Budget
Indian equities have opened higher ahead of the Union Budget after six straight days of losses.
The S&P BSE Sensex opened 0.7% higher at 46,617 while the NSE Nifty 50 index gained 0.9% at the start of trade to open at 13,758. The last instance of the Sensex and Nifty declining for six straight days ahead of the Union Budget was back in February 2001.
Among the sectoral indices, the Nifty Bank index has opened 1.3% or 400 points higher while the PSU Bank index is also up 1.3%.
The Auto index has gained 1.1% while the FMCG and Metal indices have gained 0.6% at the start of trade.
Broader markets have also opened higher ahead of the budget. The Midcap index has opened 0.7% higher while the Small cap index has gained 0.5%.
1,143 stocks on the NSE have opened with gains while 403 stocks are declining at the start of trade.
Global Market Update
Asian markets reversed early losses to trade with gains amids signs of easing cash crunch in China aided sentiment.
Benchmark indices in Japan, South Korea and Hong Kong are advancing. The U.S. Dollar is fluctuating against major peers while yield on the 10-year treasuries stood at 1.07%.
The Singapore-traded SGX Nifty, an early indicator of the Nifty 50 Index’s performance in India, rose 0.3% to 13,761 as of 8:35 a.m.
For all that you need to know going into today’s trade, click here.
How Indian Equities Stack Up Ahead Of The Union Budget
In the week before the union budget, Indian equities marked a six-day losing streak after hitting an all-time high on Jan. 21.
During this period, the S&P BSE Sensex and NSE Nifty 50 have fallen by about 3,899 points and 1,119 points from their all-time intra-day highs of 50,184 and 14,753, respectively.
As a result, the Nifty broke its key 50-day moving average level of 13,743, ending below it.
“We were skeptical when the markets were making new highs. The index breaking levels of 14,222 was the first sign of weakness for us,” Sameet Chavan, chief technical and derivatives analyst at Angel Broking, told BloombergQuint over phone. “The Nifty has now closed below the five-week exponential moving average, which tells us that a move towards 13,200-13,000 cannot be ruled out.”
Indian equities nearly doubled from their multi-year lows in March 2020 as economic recovery following the strictest lockdown due to Covid-19 was faster than expected and foreign investors continued to plough money into the country’s stock markets.
Budget 2021: ‘Constructing’ The Post-Covid Economy
Union Budget 2021-22 will be one of the most anticipated events in India’s recent history, writes Keki Mistry -- Vice Chairman and Chief Executive Officer of Housing Development Finance Corporation -- for BloombergQuint Opinion.
The dust is settling after the torrid health catastrophe that affected millions and threatened to leave a permanent emotional scar, and we are finally seeing the light at the end of the tunnel. India has had a faster than expected economic recovery and a low fatality rate from Covid-19. India’s case fatality rate of 1.44% is amongst the lowest in the world. The distribution of vaccines has also commenced. Commendable efforts by the government and healthcare professionals as well people and community participation to take safety precautions are enabling India to get itself back on track.
Four Key Things Investors Will Keep An Eye On
Spending Vs Deficit: A Tightrope Walk
Most economists are unanimous in their view that India needs to prioritise growth by spending more. The Indian government needs to stimulate growth and push for job creation through a spending boost. Credit Suisse’s Neelkanth Mishra noted that the government is also willing to spend more as most Covid-19-related restrictions have been removed. This would mean that the growth multiplier for every spent would be higher now, it said.
Conventional wisdom, however, would suggest that higher spending can lead to a wider fiscal deficit. But nothing about this year’s budget is conventional. J.P. Morgan’s Sajjid Chinoy and Toshi Jain, in a recent note, argued that it is possible for the government to deliver a budget that expands spending while simultaneously reducing the headline budget gap.
Spending Boost
India’s relief package during the Covid-19 pandemic has been relatively small compared to other countries. And low fiscal spending has its costs, according to HSBC Global Research. “Low fiscal spending could leave behind other scars like inequality, which in turn could hurt the sustainability of growth,” it said. The budget can prioritise on fixing that.
Fiscal Worries
Still, the government will need to keep long term debt sustainability in mind. With the country’s debt-to-GDP ratio likely to hit close to 85% in FY21, an attempt will need to be made to bring that down. That means a steady decline in the fiscal deficit will need to be targeted. The budget gap in the ongoing fiscal is expected to rise to 6.5-8% of the GDP. For the next fiscal, the government is expected to target for a deficit of around 5.6%, according to consensus of estimates.
This will mean, according to a median forecast of 15 analysts surveyed by Bloomberg, the government could announce a borrowing plan of Rs 10.6 lakh crore. That’s lower than the record Rs 13.1 lakh crore in this fiscal, but 75% above the previous five-years’ average.
Divestment Efforts
Over the last few years, Prime Minister Narendra Modi’s administration has been trying to conduct asset sales of state-run companies with a broader objective of more privatisation in the economy. And as the budget gap has widened, the divestment targets have become lofty to make up for that deficit. In last year's budget, the government set a divestment target of Rs 2.1 lakh crore. So far, it has only been able to garner Rs 19,499 crore.
FM Nirmala Sitharaman To Present First Digital-Only Budget At 11 A.M.
Finance Minister Nirmala Sitharaman is set to present the Union Budget for the financial year 2021-22 in the Parliament at 11 a.m. today. This is Sitharaman’s third budget after Prime Minister Narendra Modi’s government returned to power in the 2019 general elections with a bigger mandate.
Sitharaman now has the daunting task of reviving an economy that was floundering since before the coronavirus struck while manoeuvring through the various new challenges that have emerged due to the pandemic-led lockdowns. With India’s flagship employment scheme failing to keep up with the demand for jobs, farmers protesting on the streets and wealth inequality getting more stark, Sitharaman’s economic package will be closely eyed by the country.
Economists and market observers have noted that the budget will be a fine balancing act between stimulating long-term growth while also keeping government finances in check.