India Stocks Gain as Budget Proposes Steps to Boost Consumption

(Bloomberg) -- India stocks gained in a volatile session after the federal budget proposed measures that may lead to a splurge in consumer spending on items ranging from new vehicles to homes.

The S&P BSE Sensex climbed 0.6 percent to 36,469.43 in Mumbai after Finance Minister Piyush Goyal proposed an income support plan for farmers along with tax relief for small taxpayers. The index climbed as much as 1.4 percent and briefly slipped into the red before ending the session with a gain. The gauge on Thursday had clocked its sharpest gains in three months, wiping out January’s losses to add 0.5 percent in the month. The NSE Nifty 50 Index also gained 0.6 percent today.

In the last budget for Prime Minister Narendra Modi’s government before the national ballot likely in April-May, Goyal proposed to spend 750 billion rupees ($10.6 billion) in the fiscal year that starts on April 1 to directly pay cash to farmers. The plan also proposed no tax on personal income up to 500,000 rupees.

India Stocks Gain as Budget Proposes Steps to Boost Consumption

The Numbers

  • Fifteen of 19 sector sub-indexes compiled by BSE Ltd. advanced, led by a gauge of auto and consumer durable companies
  • India VIX, a measure of volatility expectations, fell the most in over seven weeks
  • S&P BSE Midcap Index gained 0.6%, while a measure of small cap stocks climbed 0.2%.
  • Maruti Suzuki India Ltd. and Hero MotoCorp Ltd. gave the biggest boosts to the benchmark index
  • State Bank of India fell 3.2% even as its 3Q profit beat estimates
  • Vedanta Ltd. tumbled 18% after downgrades by CLSA and Goldman Sachs
  • A gauge of banking stocks declined on govt’s proposed record $100-billion borrowing next fiscal year

Strategist View

  • “Focus on rural per capita income growth will be good for consumer goods, automobile, tractor makers, domestic appliances makers and television makers, among others. Direct benefit transfers to vulnerable farmer families is a big positive,” said Dharmesh Kant, head of research at IndiaNivesh Securities Ltd.
  • “The Government has recognized for the first time that 500,000 rupees of income per annum is in effect the subsistence limit for a good life and shouldn’t be taxed,” said Atul Gupta, senior director at Deloitte India. “Small taxpayers have been given a tax bonanza in the election year.”

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