Equities edged higher on hopes that the fiscal deficit would be contained at manageable levels this financial year boosted sentiment. ?The fiscal deficit for 2013-14 will be contained at 4.6% of GDP, well below the red line that I had drawn last year,? said finance minister P. Chidambaram in his interim Budget speech on Monday. ?I can confidently assert that the economy is more stable today than what it was two years ago. The fiscal deficit is declining, the current account deficit has been contained, inflation has moderated, the quarterly growth rate is on the rise, the exchange rate is stable…?
The benchmark indices ended the day higher by about half-a-percentage-point. The BSE Sensex added 0.48%, or 97.24 points, to close at 20,464, and the NSE?s broader 50-share Nifty gained 0.41%, or 24.95 points, to close at 6,073.
?The interim budget alleviated market fears by staying away from populist measures, reiterating fiscal consolidation path and lowering excise duty for certain ailing sectors like automobile and capital goods, despite a limited headroom,? said Anup Bagchi, MD & CEO, ICICI Securities. ?The FM?s commitment to restrict the fiscal deficit at 4.6% of GDP in FY14 and bring it further down to 4.1% next fiscal helped.?
According to Raamdeo Agrawal, joint managing director at Motilal Oswal Financial Services, the interim budget did not provide any major surprises ? either positive or negative. ?In the finance minister?s vote-on-account speech, the commitment was very strong towards maintaining fiscal discipline and keeping inflation under control,? said Agrawal, adding that markets valuation looked attractive at this point as the aggregate market numbers have a solid base and upcoming election looked promising. ?The upside could be anything, but downside seems very limited from here,? he said.
Monday’s rally was led by banking and auto stocks. Bank stocks rose as the finance minister proposed to infuse Rs 11,200 crore in public sector banks to enhance their capital in FY15. ICICI Bank (2.13%), HDFC Bank (1.37%) and Axis Bank (1.15%) were among the top gainers in the banking stocks.
Auto stocks rallied as the finance minister proposed to cut the excise duty on small cars to 8% from 12%, and the tax on SUVs to 24% from 30%. M&M (2.83%) and Hero Motorcorp (1.99%) were the top auto gainers. Foreign institutional investors (FIIs) bought shares worth $84.5 million on Monday, paring their net sales to $140 million in February. FIIs remain net sellers of $153.5 million in the year-to-date.
Key Asian markets ended in the green on Monday. Hang Seng, Straits Times and Jakarta Composite gained over 1% each. The FTSE 100, DAX and the CAC, were trading up anywhere between 0.04% and 0.93%.
