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Union Budget disappoints Indian markets on Saturday

The Union Budget disappointed Indian markets on Saturday, as Sensex and Nifty settled with losses of around 2.50% each. Indices made a cautious start of the day, as the Controller General of Accounts’ data (CGA) showed that the government’s fiscal deficit touched 132.4 per cent of the full-year target at December-end mainly due to slower pace of revenue collections. Weakness remained over the street during the whole trading day, amid the FICCI’s Business Confidence Survey Report stating that India Inc is facing huge risks from delays in necessary structural reforms in the factor markets and lack of adequate credit availability to micro, small and medium enterprises (MSMEs).

In the second half of the trading session, losses got intensified, after the government in its Union Budget announcements raised fiscal deficit target to 3.8 per cent of the GDP from 3.3 per cent pegged earlier for 2019-20 due to revenue shortage. Adding more worries, the Reserve Bank of India (RBI) said that non-food bank credit growth decelerated to 7.0 per cent in December 2019 from 12.8 per cent in December 2018. Market participants paid no heed towards Finance Minister Nirmala Sitharaman’s announcements over cut in personal income tax, extended tax benefits for affordable housing and gave relief to companies on payment of dividend in the Union Budget for 2020-21.

Back home, the power industry stocks ended lower, even after the government proposed a Rs 22,000 crore outlay for renewables and power sector in 2020-21 for realising its goal of 24X7 electricity for all and providing freedom to consumers to choose service provider and tariff. Further, stocks related to the logistic sector remained in watch, after the government said that a national logistics policy will be released soon which will set up a single window e-logistics market and focus on employment generation and making MSMEs competitive.

Finally, the BSE Sensex slipped 987.96 points or 2.43% to 39,735.53, while the CNX Nifty was down by 300.25 points or 2.51% to 11,661.85.

The BSE Sensex touched high and low of 40,905.78 and 39,631.24, respectively and there were 06 stocks advancing against 24 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 2.21%, while Small cap index was down by 2.20%.

The only gaining sectoral indices on the BSE were IT up by 1.41% and TECK up by 1.08%, while Realty down by 7.82%, Capital Goods down by 4.79%, PSU down by 3.97%, Industrials down by 3.94% and Metal down by 3.50% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 4.13%, Hindustan Unilever up by 1.94%, Nestle up by 1.68%, Tech Mahindra up by 1.52% and Infosys up by 0.50%. On the flip side, ITC down by 6.97%, Larsen & Toubro down by 5.98%, HDFC down by 5.87%, SBI down by 4.83% and ONGC down by 4.18% were the top losers.

Meanwhile, the International Monetary Fund (IMF) Managing Director (MD) Kristalina Georgieva has said that the Indian economy experienced some abrupt slowdown in 2019 due to turbulence in non-banking financial institutions and major reform measures like GST and note ban, but the economy is not in a recession. She also said that India undertook some important reforms which would be beneficial for the country over the longer term, but they do have some short-term impact.

Georgieva said ‘we had to revise our growth projections, downwards to four percent for last year. We are expecting 5.8 percent (growth rate) in 2020 and then an upward trajectory to 6.5 percent in 2021.’ She also stated that there is not a lot of fiscal space in India. She said there is need to recognize that the policies of the government on that side, on the fiscal side have been prudent. In the medium-term, she said, ‘the IMF remains positive about India. This is why we see that upswing potential for the growth in the country. The current economic slowdown cannot be described as a recession. ‘No… You’re far from that. But it is a significant slowdown, not the recession.’

IMF MD noted that the consumption in India also slowed down and that contributed to the overall slowdown in the economy. She said the IMF would be keen to see what India does to get relatively sound macroeconomic fundamentals to pay off in terms of better growth trajectory. She also said ‘one thing that is important for India is that budgetary revenue has been below target. The country knows that. The finance minister knows it. They need to increase budgetary revenue collection so they can improve their fiscal position. I said it’s tight on the spending side, but I also want to stress that there is room to improve collection on the revenue side.’

The CNX Nifty traded in a range of 12,017.35 and 11,633.30. There were 07 stocks advancing against 43 stocks declining on the index.

The top gainers on Nifty were TCS up by 4.25%, Hindustan Unilever up by 1.95%, Nestle up by 1.70%, Tech Mahindra up by 1.31% and Wipro up by 0.15%. On the flip side, ITC down by 6.76%, Tata Motors down by 6.34%, HDFC down by 6.30%, Larsen & Toubro down by 6.04% and Zee Entertainment down by 6.00% were the top losers.

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