The stock market on Friday witnessed a roller-coaster ride as Piyush Goyal, the interim Finance Minister, presented the current government’s final Budget ahead of General Elections 2019.

The Sensex, which had managed to gain nearly 500 points when Goyal was reading out his speech, slipped in the negative zone minutes after the Budget announcement was made. The Bank Nifty index fell more than 500 points from the day’s high after the Budget speech.

There was a knee-jerk reaction following announcement of the fiscal deficit target for the current and next financial years at 3.4 per cent, and the market gave up the gains as traders felt the government expenditure on populist schemes could dent the fiscal deficit target. Before the reality sunk in for most traders, the market partly cheered the government’s announcement of tax sops for the middle-class as it would boost consumption. But that cheer was short-lived.

The Bank Nifty index that was trading at around 27,533 points at around 12.30 pm came down to around 26,900 post 2.30 pm. The index closed with the loss of 77 per cent or 209 points at 27,085. The Sensex was trading at 36,767 at 1.13 pm but fell to 36,284 post 2.30 pm.

Huge spending

The index closed at 36,469 with a gain of 0.59 per cent or 212 points. The broader index Nifty closed at 10,893, up 62 points or 0.58 per cent.

“The government has announced huge spending in doles to farmers, poor and even the middle-class and yet given a very rosy fiscal deficit target. Both do not gel, and markets are sceptical of the government being able to maintain its fiscal deficit target,” said the CEO of a Mumbai-based institutional broking firm.

Goyal, the first chartered accountant to present a Budget, announced a stimulus of nearly ₹1.35 lakh crore to rural India. It included ₹75,000 crore to 12 crore farmer families holding less than two hectares of land.

They would get ₹6,000 a year as grant from the government. Further, ₹60,000 crore has been earmarked for MNREGA and a substantial sum will be doled out as interest rate subvention and incentive schemes to farmers for loan repayment. The expectation of a highly populist Budget ahead of the 2019 elections had spread nervousness ahead of the Budget as there was a scare in the market that the fiscal deficit could be way above 3.6 per cent due to government spending on populist measures.

All along, Arun Jaitley, the original Finance Minister who is in the US due to health issues, had promised that he would bring down India’s fiscal deficit to below 3.3 per cent. But in the run-up to the Budget, the mood was sombre on Dalal Street. Thursday’s 600-point rally in the Sensex though, was partly attributed to the US Federal Reserve’s move to slow the pace of its rate hikes, which meant that liquidity may not tighten further in the short term.

Related Topics