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India's equity market experienced a rollercoaster ride on Budget Day, February 1st, showcasing significant volatility throughout the special trading session. The benchmark indices, BSE Sensex and NSE Nifty, commenced trading positively, generating initial optimism among investors. However, this positive sentiment was short-lived. Between 11:45 AM and 11:55 AM, a sharp and dramatic decline ensued, with the Sensex plummeting nearly 900 points from its intraday high. This sudden downturn underscores the market's sensitivity to the details unveiled in the Union Budget.
The precipitous fall during the budget hour can be primarily attributed to the relatively modest increase in capital expenditure (capex). While the budget announced an increase of 10% in capex for 2025-26, reaching Rs 11.2 lakh crore, experts believe this might not be sufficient to significantly bolster economic growth. This apprehension regarding the potential impact on economic expansion fueled the sell-off, underscoring the market's focus on long-term growth prospects. The initial negative reaction highlights the market's expectations for more substantial investments in infrastructure and capital projects to drive future economic performance.
Despite the initial plunge, the market demonstrated resilience and recovered substantially. By approximately 1:40 PM, the Sensex had not only recouped its losses but had also moved into positive territory. This rebound indicates a degree of optimism and suggests that the market's concerns, while significant, were not insurmountable. However, the overall outcome remained mixed. While the Sensex closed marginally higher, gaining 5.39 points (0.01%) to end at 77,506, the Nifty experienced a slight decline of 26.25 points (0.11%), settling at 23,482. This divergence between the two major indices indicates a degree of sector-specific performance and differential responses to the budget's announcements.
The intraday high of 77,899 and low of 77,006 for the Sensex, and the Nifty's fluctuation between 23,632 and 23,339, paint a picture of a day marked by significant uncertainty and rapid shifts in investor sentiment. This highlights the dynamic nature of the market and its responsiveness to economic policy announcements. The initial negative reaction to the relatively modest increase in capex stands in contrast to the positive response to the consumption push measures introduced in the budget. This suggests a complex interplay of factors driving market behavior.
Analysts, such as Pankaj Pandey, Head of Research at ICICI Direct, offered insights into the budget's overall impact. Pandey characterized the budget as a blend of opposing forces: a consumption push through personal income tax benefits, designed to stimulate consumer spending, and a moderation in capex, reflecting a prioritization of fiscal prudence over immediate growth. This balanced approach, while aiming for long-term sustainability, may not have fully satisfied investor expectations for a more aggressive stimulus package aimed at rapid economic expansion. The market's initial negative response suggests that investors may have prioritized the potential implications of lower capex over the benefits of the consumption push in the short term.
The budget's impact on specific sectors is also noteworthy. While the overall market experienced volatility, certain sectors such as consumer goods stocks exhibited a more positive response. This suggests that the market is discerning in its reaction to the budget's various components. The budget's measures aimed at boosting consumption may have particularly benefited companies operating in the consumer goods sector, potentially offsetting the negative sentiment generated by the modest capex increase. Further analysis will be required to fully understand the nuanced impact of the budget on various sectors and the reasons behind their differential responses.
In conclusion, Budget Day 2024 revealed a complex and dynamic response from the Indian equity market. The initial sharp decline, followed by a partial recovery, reflects the market's sensitivity to the balance between consumption-boosting measures and fiscal prudence embodied in the budget. While the Sensex ended marginally higher, the Nifty's slight decline and the intraday volatility highlight the uncertainty and the need for further analysis to fully comprehend the longer-term implications of the budget's announcements. The differential responses across sectors also underscore the need for a more granular examination of the budget's impact on specific industries and companies. This volatile session serves as a reminder of the intricate interplay between government policy, market expectations, and investor sentiment in shaping the trajectory of the Indian equity market.
Source: No Budget Day cheer for market, street turns bullish on consumer goods stocks