Market analysts back govt focus on growth, rue lack of direct stimulus

ON TUESDAY, THE BSE SENSEX WAS UP 848.40 POINTS OR 1.46%, ENDING AT 58,862.57, WHILE 50-SHARE INDEX NIFTY GAINED 237 POINTS OR 1.37% AT 17,576.85

The stock markets rose over 1% in a volatile session on Budget day driven by the government’s infra spending and increase in overall capex, though analysts said the finance minister’s proposals could have given greater impetus to the economy reeling from a pandemic-induced slump.

Analysts and investors cheered the government’s focus on growth but the lack of a direct stimulus to spur private consumption, low divestment targets (for FY22 and FY23) and higher borrowings left them worried in an environment of steep inflation of commodity and crude prices. However, no change in direct taxes or any incremental taxes on capital gains helped market sentiment.

On Tuesday, the BSE Sensex was up 848.40 points or 1.46%, ending at 58,862.57, while the 50-share index Nifty gained 237 points or 1.37% at 17,576.85.

“This Budget is focussed on supporting growth through encouraging investments, entrepreneurs, startups and taxpayers by creating trust. Capital expenditure has moved from 12% of the Budget in FY15 to 19% of the Budget in FY23. Revenue receipt growth at 6% is significantly lower than 27% last year. This is driven by a significantly lower divestment and asset monetisation target. Hopefully, there is an upside on revenue receipts. This Budget is about laying the foundation for the positioning of the centenary of India. 68% of defence capital allocation to local manufacturers, launch of CBDC, focus on organic farming and environmental issues/climate change, developing logistics in India, digital banks and futuristic policies like battery swapping or interoperability standards, etc will be building blocks on which India will march in amrut kaal,” Nilesh Shah, group president and MD, Kotak Mahindra Asset Management, said.

Finance minister Nirmala Sitharaman, projected a fiscal deficit of 6.4% of GDP in 2022-23 while the government has significantly increased the capital expenditure target by 35.4% to ₹7.5 lakh crore for the next fiscal. For 2022-23, the disinvestment target is set at ₹65,000 crore, while for FY22 it was revised at ₹78,000 crore.

Market analysts said the Budget was missing some balancing measures in the context of the current inflationary scenario and a slowing economy.