Sensex, Nifty gain for fourth consecutive year post Budget

Extending Budget gains, domestic markets on Monday climbed nearly 1%. At 1243 hours Sensex was trading at 28,461.43, up 220.91 points or 0.78%, while Nifty was at 8,805.35, up 64.40 points or 0.74%. Nifty has touched this mark after four months. 

Is Budget the main reason?

During the pre-budget period, analysts had predicted that the markets in the medium-term resistance level may be broken if the budget is strong. 

Amit Goenka, Analyst at multibaggerstocks.co.in, had told to Zeebiz, "Medium-term resistance levels for Sensex and Nifty may be broken if the budget is strong. The level for Sensex will be 28,250 and for Nifty will be 8,750."

Both the levels on Monday were broken today.

Talking about today's gains, Goenka said, "That is because the FPI's wanted clarity with respect to the general anti-avoidance rule (GAAR) as well as a tax on indirect transfer. The budget has answered that and moreover there is no new tax on short term capital gains and the long term capital gains holding period has remained the same. Thus keeping the inflows intact."

"We have looked at the three year data of Sensex and Nifty performance a week after the budget announcement. Looking at the trend, the markets have not disappointed atleast for a week post the Budget since 2014," he said. 

Since 2014, domestic markets have gained post the announcement of Annual Budget.

In 2014, Budget was announced on July 10, after Modi-government took charge. On that day, Sensex closed at 25372.75 and Nifty at 7567.75, however, by the end of the  week, i.e, on July 17 Sensex closed at 25561.16 and Nifty at 7640.45. 

In 2015, the Annual Budget was announced on February 28. That day, Sensex closed at 29361.5 and Nifty at 8901.85. After a week, which was on March 5, Sensex ended at 29448.95 and Nifty at 8937.75.

Last year, the Budget was presented on February 29. Sensex had closed at 23002 on the Budget day. After a week, which was on March 4, Sensex ended at 24646.48 and Nifty at 7485.35. 

This time, on February 1, the Sensex closed at 28141.64 and Nifty at 8716.4. 

Rate cut hope

Another reason why the markets are surging is rising rate cut hope from RBI. On Wednesday, Reserve Bank of India is likely to cut the interest rate considering inflation has touched two-year low in the month of December. This has given more room for the central bank to consider the rate cut.

ASSOCHAM President Sunil Kanoria, in a report released on February 5, said that the industry is expecting at least 50-75 basis points reduction in the policy interest rates and the banks should pass on the entire benefit to the borrowers. 

“As a majority owner of the banks and as a regulator, both the government and the RBI have roles in advising banks to pass on the commensurate reduction in the interest rates. This is all the more important in the wake of dismal credit growth, marked by subdued consumer demand and lack of investment appetite despite lowering of the lending rates,” Kanoria said.