The loss in Adani Group shares saw the Nifty Index end negatively on Wednesday. It was the first drop for the 50-share index on Union Budget Day in three years. In daily trade, Nifty has swung about 620 points, or 3.6 per cent – the third largest in the 11 budgets introduced since Narendra Modi took over as the country’s prime minister in 2014.
Markets opened positively amid positive global signals and rose more than 2 percent after the budget measures were announced, which included cutting income taxes and increasing spending on infrastructure development. Also, lowering the budget deficit target by 5.9 percent and expectations of increased economic growth drove the bulls. However, the optimism was suppressed by the defeat in the companies of the Adani Group, which wiped out nearly 8 trillion rupees in five days. Leading Adani Enterprises saw its share price collapse by as much as 35 percent before closing down 27 percent from the previous day’s close. Adani Ports & SEZ tumbled 18%. Both stocks are part of the Nifty Index, which ended down 0.26 percent, or 46 points, at 17,616.3.
The market was abuzz with talk about some foreign banks liquidating the shares pledged by Al-Adani Group.
Sensex, which has no Adani Companies presence, managed to gain 158 points, or 0.27 percent. However, the index fell more than 1,000 points from the day’s high of 60,773 to end at 59,709 with State Bank of India (SBI) shares dropping 4.8 percent.
“A sharp increase in capital spending in a year of global uncertainty, reliable fiscal consolidation, no change in the capital gains tax regime for equities, lower-than-expected market borrowing and a potential shift in the RBI’s stance bodes well for equities, Redham Desai, head of equity research and Indian equities strategist, Morgan Stanley, said in a note.
Desai said budget measures will “likely” increase consensus on earnings estimates.
Experts said had it not been for the defeat in Adani shares, the market’s scorecard would have looked much better.
The budget was very credible because the figures provided did not lead to any negative surprises. It shows a clear focus on increasing capital spending, demonstrating a commitment to drive future growth. A. Balasubramanian, Managing Director and CEO of Aditya Birla Sun Life AMC, said the focus on the agricultural economy would also boost rural growth.
Finance Minister Nirmala Sitharaman, in her last full budget ahead of next year’s general election, sharply raised capital spending to 10 trillion rupees (3.3 per cent of GDP) from an already high 7.3 trillion rupees (2.7 per cent of GDP) in Fiscal Year 23, which equates to a 37.4 percent year-over-year increase.
“The markets welcomed the budget with enthusiasm. Later, Adani Group stole the stage when its shares collapsed, sending market sentiment down dramatically. Although the Fed meeting tonight is important, Adani’s drama is the event,” said Parth Nyati, founder of Tradingo. the main focus of the market.
Of the 19 sectoral indices of the Bahrain Stock Exchange, only four of them managed to achieve gains. The BSE FMCG and BSE IT index outperformed with gains of more than 0.7 percent each.
The overall market breadth was negative, with 1,176 stocks advancing and 2,368 stocks declining. The Nifty Smallcap and Nifty Midcap indices ended up losing more than 1 percent.