Sensex soars 848 pts, Nifty ends above 17,570; steel stocks rally

The main indices ended a volatile session with robust gains on Tuesday. The Nifty ended above the 17,570 mark. Metals, IT, pharma and FMCG stocks advanced while autos and oil & gas stocks declined.

Investors cheered the union budget with its higher capital expenditure and thrust on infra. The government`s focus on boosting manufacturing as well as an underlined emphasis on areas such as startups, modern mobility and clean energy, boosted investors sentiment.

The barometer index, the S&P BSE Sensex, was up 848.40 points or 1.46% to 58,862.57. The Nifty 50 index advanced 237 points or 1.37% to 17,576.85.

In the broader market, the S&P BSE Mid-Cap index gained 1.08% while the S&P BSE Small-Cap index rallied 0.92%.

The market breadth was positive. On the BSE, 1,756 shares rose and 1,591 shares fell. A total of 102 shares were unchanged.

Economy:

The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers` Index (PMI) was at 54 in January 2022, down from 55.5 in December 2021, signaling the weakest improvement in the health of the sector since last September.

Union Budget 2022-23:

Finance Minister Nirmala Sitharaman while presenting the Union Budget 2022-23 in Parliament today stated that India`s economic growth in the current year is estimated to be 9.2%, highest among all large economies.

In five big infrastructure projects, the government has proposed expanding highways in the country by 25,000 kilometres, allocating Rs 60,000 crore to the Nal se Jal scheme, five river link projects across various states, an additional Rs 48,000 crore in the PM housing scheme, and boosting infrastructure development in the North East.

The Finance Minister also announced the auction of 5G spectrum in 2022; proposed setting up 75 digital banking units in 75 districts; announced a national programme for mental health, worsened by the Covid-19 pandemic; and brought virtual currencies like cryptocurrency and non-fungible tokens under the tax net.

"The Fiscal Deficit in 2022-23 is estimated at 6.4% of GDP, which is consistent with the broad path of fiscal consolidation announced by me last year to reach a fiscal deficit level below 4.5% by 2025-26" announced the Union Minister for Finance and Corporate Affairs Nirmala Sitharaman. Further, the Revised Fiscal Deficit in the current year is estimated at 6.9% of GDP as against 6.8% projected in the Budget Estimates.

The Finance Minister stated that the outlay for capital expenditure in the Union Budget is once again being stepped up sharply by 35.4% from Rs 5.54 lakh crore in the current year to Rs 7.50 lakh crore in 2022-23. This has increased to more than 2.2 times the expenditure of 2019-20. This outlay in 2022-23 will be 2.9% of GDP.

With Capital Expenditure taken together with provision made for creation of capital assets through Grants-In-Aid to States, the `Effective Capital Expenditure` of the Central Government is estimated at Rs 10.68 lakh crore in 2022-23, which will be 4.1% of GDP, informed the Minister.

The total expenditure in 2022-23 is estimated at Rs 39.45 lakh crore, while the total receipts other than borrowings are estimated at Rs 22.84 lakh crore. She further added that as against a total expenditure of Rs 34.83 lakh crore projected in the Budget Estimates 2021-22, the Revised Estimate is Rs 37.70 lakh crore.

The total market borrowings of the government for 2022-23 are estimated to stand at Rs 11,58,719 crore. The Revised Estimates for the same for 2021-22 are Rs 8,75,771 crore as against the Budget Estimates of Rs 9,67,708 crore.

FM said "the procurement of wheat in Rabi 2021-22 and the estimated procurement of paddy in Kharif 2021-22 will cover 1208 lakh metric tonnes of wheat and paddy from 163 lakh farmers, and Rs 2.37 lakh crore direct payment of MSP value to their accounts".

The Government proposes to permit taxpayers to file an updated return on payment of additional tax within two years from the end of the relevant assessment year announced. This would give taxpayers an opportunity to correct any omissions or mistakes in correctly estimating their income for tax payment.

The Government proposes to increase the tax deduction limit to 14% from 10% on employer`s contribution to the NPS account of State Government employees.

Further, FM said that `any income from transfer of any virtual digital asset shall be taxed at the rate of 30%`. She said that the scheme would not allow any deduction in respect of any expenditure or allowance while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.

The Government in order to provide a level playing field between co-operative societies and companies proposes to reduce the Alternate Minimum Tax rate for co-operative societies to 15% from the current 18.5%. The Government also proposes to reduce the surcharge on co-operative societies to 7% from 12% at present for those having total income of more than Rs 1 crore and up to Rs 10 crore.

On the Indirect tax side, the Union budget says that Customs administration in Special Economic Zones will be fully IT driven. It provides for phasing out of concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5%.

To encourage the efforts for blending of fuel, unblended fuel shall attract an additional differential excise duty of Rs 2 per litre from the 1st October 2022.

To give a boost to the Gems and Jewellery sector, Customs duty on cut and polished diamonds and gemstones is being reduced to 5%. To facilitate export of jewellery through e-commerce, a simplified regulatory framework shall be implemented by June this year.

Customs duty on certain critical chemicals namely methanol, acetic acid and heavy feed stocks for petroleum refining are being reduced, while duty is being raised on sodium cyanide for which adequate domestic capacity exists.

Duty on umbrellas is being raised to 20%. Exemption to parts of umbrellas is being withdrawn. Exemption is also being rationalised on implements and tools for agri-sector which are manufactured in India.

To incentivise exports, exemptions are being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes that may be needed by bonafide exporters of handicrafts, textiles and leather garments, leather footwear and other goods. Duty is being reduced on certain inputs required for shrimp aquaculture so as to promote its exports.

The Government proposes to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23 for more efficient and cheaper currency management system.

The issuance of e-Passports using embedded chip and futuristic technology will be rolled out in 2022-23 to enhance convenience for the citizens in their overseas travel.

For the telecom sector, FM informed that required spectrum auctions will be conducted in 2022 to facilitate rollout of 5G mobile services within 2022- 23 by private telecom providers. A scheme for design-led manufacturing will be launched to build a strong ecosystem for 5G as part of the Production Linked Incentive Scheme, she added.

On the defence front, the Government reiterates committed to reducing imports and promoting AtmaNirbharta in equipment for the Armed Forces. 68% of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58% in 2021-22. Defence R&D will be opened up for industry, startups and academia with 25% of defence R&D budget earmarked.

Numbers to Track:

In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 74.82, compared with its close of 74.65 during the previous trading session.

MCX Gold futures for 4 February 2022 settlement rose 0.87% to Rs 48,099.

The US Dollar index (DXY), which tracks the greenback`s value against a basket of currencies, fell 0.22% to 96.33.

In the commodities market, Brent crude for March 2022 settlement lost 70 cents or 0.78% at $88.56 a barrel.

The yield on 10-year benchmark federal paper rose 2.17% to 6.829 as compared with 6.684 at close in the previous trading session.

Global Markets:

European markets advanced while most Asian indices ended higher on Tuesday, tracking gains on Wall Street. Markets in mainland China, Hong Kong, South Korea and Singapore are closed for a holiday.

Buzzing Segments:

Steel stocks rose on Tuesday with FM Nirmala Sitharaman announcing certain measures that are expected to be favourable for the steel industry.

Tata Steel (up 7.46%), Jindal Steel & Power (up 6.27%), SAIL (up 5.38%) and JSW Steel (up 4.06%) surged.

Customs duty exemption given to steel scrap last year is being extended for another year. Certain anti-dumping and countervailing duties on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked, FM said in the Union Budget speech today.

Meanwhile, the Nifty IT index added 1.57% to 35,371.65. The index has rallied 5.67% in three days.

HCL Technologies (up 3.22%), Infosys (up 2.12%), TCS (up 1.84%), Mphasis (up 1.3%), Wipro (up 0.86%), Larsen & Toubro Infotech (up 0.7%), L&T Technology Services (up 0.1%) and Mindtree (up 0.06%) advanced.

Tech Mahindra rose 1.87%. On a consolidated basis, the IT major`s PAT stood at Rs 1,369 crore in Q3 FY22; up 2.2% QoQ and up 4.5% YoY. Revenue was at Rs 11,451 crore; up 5.2% QoQ and up 18.7% YoY. EBITDA stood at Rs 2,060 crore; up 3.3% QoQ, up 8.7% YoY.

January Auto Sales:

Ashok Leyland fell 1.40%. The company`s sales grew 6% to 13,939 units in January 2022 from 13,126 units sold in January 2021. While the total sales of medium & heavy commercial vehicles (M&HCV) rose 17% to 8,663 units, while sales of light commercial vehicles (LCVs) declined 8% to 5,276 units in January 2022 over January 2021.

Mahindra & Mahindra (M&M) fell 1.67%. The company`s overall auto sales for the month of January 2022 stood at 46,804 vehicles, up 20% YoY. In the commercial vehicles segment, Mahindra sold 21,111 vehicles in January 2022 with growth of 58%. The passenger vehicles segment (which includes UVs, Cars and Vans) sold 19,964 vehicles in January 2022, down 3% YoY.

M&M Farm Equipment Sector sold 22,682 tractors in January 2022, which is lower by 35% as compared with 34,778 tractors sold in January 2021.

Maruti Suzuki India fell 0.43%. The car major recorded a total sales of 1,54,379 units in January 2022, down 3.96% as against 1,60,752 units sold in January 2021. On a sequential basis, however, the company`s total sales have improved by 0.80%. The auto maker had sold 1,53,149 units in December 2021.

Bajaj Auto fell 0.51%. The two-wheeler maker`s total vehicle sales declined 15% to 3,63,443 units in January 2022 over January 2021. Sequentially, total vehicle sales rose 0.27% in January 2022 over December 2021. The company`s total domestic sales declined 12% while total exports fell 16% year-on-year last month. Bajaj Auto`s total two-wheeler sales fell 16% to 3,23,430 units while total commercial vehicles sales fell 1% to 40,013 units in January 2022 over January 2021.

Escorts fell 0.20%. The company said its Agri Machinery division sold 5,707 tractors in January 2022 as against 9,021 tractors sold in January 2021, a drop of 36.7% YoY. Domestic tractor sales in January 2022 declined by 40% to 5,103 tractors from 8,510 tractors sold in January 2021. Export tractor sales in January 2022 was at 604 tractors against 511 tractors sold in January 2021, registering a growth of 18.2% on YoY basis. Escorts said that the industry wholesales continue to be impacted in January 2022, due to unseasonal rainfall in certain part of country, high base of last year and inflationary impact on short term demand leading to higher level of channel inventory in certain geographies.

TVS Motor Company rose 3.95%. The two wheeler maker registered sales of 266,788 units in January 2022, down 13.14% from 307,149 units sold in January 2021. Sequentially, the company`s sales rose 6.32% last month from 250,933 units sold in December 2021. Total two-wheelers registered sales of 254,139 units in January 2022, down 13.73% as against sales of 294,596 units in January 2021. The production and sales of premium two-wheelers were severely affected due to the shortage of semiconductors. The company said it is cautiously optimistic that this will improve in the coming months.

Eicher Motors fell 0.77%. The company`s unlisted subsidiary, VE Commercial Vehicles (VECV) sold 5,434 units of commercial vehicles in January 2022, registering a decline of 4.2% on a year-on-year (Y-o-Y) basis from 5,673 units in January 2021. VECV had sold 6,154 units of commercial vehicles in December 2021. On a sequential basis, the commercial vehicles sales were lower by 11.69% as compared to 6,154 units sold in December 2021.

VST Tillers Tractors fell 2.24%. The company`s total sales jumped 25.50% to 3,646 units in January 2022 from 2,905 units sold in January 2021. Sequentially, the company`s total sales rose 0.16% in January 2022 from 3,640 units sold in December 2021. The company`s power tillers sales grew 40.74% to 3,178 units in January 2022 from 2,258 units in January 2021. Total tractor sales stood at 468 units in January 2022, 27.66% lower than 647 units sold in January 2021.

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