Market and Industry Reactions to Budget 2022

5G rollout, crypto tax and focus on growth. Budget 2022 gave stock market more than one reason to cheer.

How the Markets Reacted to Budget 2022

On Tuesday, February 1, 2022, as Finance Minister Nirmala Sitharaman delivered the Union Budget, stock market players were all ears. Stocks often go up if equity markets believe the Budget is favourable to growth. But this is not something one can predict. Financial markets respond differently every year to the Budget, sometimes surging and a few times slipping.

Also Read: Union Budget 2022: Key Highlights

Before this year's Budget, the markets were highly volatile, reacting to a global selloff triggered by the US Federal Reserve's hint of a possible policy tightening cycle, rising inflation, and outflows of foreign capital. The Sensex and Nifty continued to fall the week before the Budget until the Economic Survey ushered in some cheer with a forecast of 8 to 8.5 per cent growth for FY 2022-23. 

Thankfully, the stock market welcomed Budget 2022 with great vigour. Headline indices rose initially on expectations, staggered a bit midday and then rose again as buyers bought the dip, enabling the Sensex and Nifty to end around the day's high. The S&P BSE Sensex rose 848 points or 1.46 per cent to 58,862 points, while the NSE Nifty 50 index rose 237 points or 1.37 per cent to 17,576 points.

Among the top gainers of the day were Tata Steel, Sun Pharma, IndusInd Bank, Larsen & Toubro (L&T), Ultratech Cement and ITC; Tata Steel rose by 7.57 per cent and Sun Pharma by 6.94 per cent. Auto manufacturers did not get much attention in the Budget. Mahindra & Mahindra was among the day's biggest losers as the stock price fell by 1.3 per cent. Other notable laggards were Power Grid Corporation, State Bank of India, and NTPC.

Also Read: Union Budget 2022: A Look At What's Expensive And What's Cheaper

  • How telecom stocks were affected by the Budget announcement

The government has promised a 5G rollout. The essential spectrum auction of 5G deployment would be carried out in FY 2022-23, said Sitharaman in her Union Budget address.

The announcements come at a time when operators are preparing for the next generation of cellular networks. Delays in the sale of airwaves that underpin 5G have hampered India's 5G goals. Following the Budget, Bharti Airtel's stock fell 0.9 per cent, while Vodafone Idea's stock fell 0.1 per cent. The S&P BSE Telecom index ended the day with a 0.3 per cent loss. Tata Teleservices Maharashtra, RailTel Corp, and GTPL Hathway lost 1 to 5 per cent each.

Indus Tower, HFCL, Tata Communications, Sterlite Tech, Tejas Networks, Route Mobile, and ITI, on the other side, gained by 1 to 5 per cent.

  • What stock market experts have to say about Budget 2022  

It is a long-term growth-oriented budget, according to Vinod Nair, Head of Research at Geojit Financial Services, which the market has embraced because there is no place for caution or populist initiatives. It is projected to stimulate growth in the future; but given the current inflationary and decreasing economy, it lacks some balancing measures. Supportive measures were required for rural, agricultural, low-income taxpayers, and pandemic-affected industries. In the short to medium term, high capex, fiscal deficit, and borrowing plans will be problems against a backdrop of high inflation, commodities and oil prices, and increasing interest rates, he said. 

Amar Ambani, head of institutional equities, YES Securities told the media that the standout proposal in the Budget has undoubtedly been the focus on increasing capital expenditure. "The budget has rightly supported growth and tabled many enablers for several industries," he added. 

  • What taxes on cryptocurrency mean

Sitharaman unveiled a tax system on digital assets such as cryptocurrency and NFTs. Any revenue derived from the transfer of virtual digital assets will be taxed at a rate of 30 per cent from April 1, 2021. Furthermore, a one per cent TDS would be applied to the transfer of these assets. While the announcement does not make cryptocurrency legal in the country, it at least gives some sort of legitimacy to it. This recognition has been welcomed by those in the industry. It is likely that traditional investors of stock markets will now consider crypto as an investment option.

The last word

In Budget 2022, the focus is clearly on growth over the medium to long term. This was much-needed after two years of the pandemic pushed India's development plans off track.  

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