Budget 2019: Impact on Indian stock market

Budget2019 impact on indian stock market
Budget2019: Impact on Indian stock market



Indian stock market opened in positive on Friday, 5th July but could not retain its early gain.  Nifty touched day’s high at 11981.75 and started towards southward journey as soon as the Budget Speech started by Finance Minister Nirmala Sitharaman. Nifty and Sensex lost 127  and 395 points and closed at 11811.15 and 39513.39 respectively. Bank Nifty closed at marginally positive but was volatile during the day and made a movement of 337 points.


The Finance Minister Nirmala Sitharaman has confidently presented her first budget on 5th July. The Budget was presented with a vision of making India $ 5 Trillion dollar economy in the coming five years. Budget 2019 started at 11 am on 5th July and continued for almost 2 hours. 


The highlights of the budget were circulated on all electronic media e.g Whatsapp, internet portals, TV and Newspaper. Indian stock market has reacted negatively as soon the Budget started, many people failed to understand what actually went wrong with the Budget. Why the market reacted so negatively?  Is the Market going to fall further or its a temporary negative sentiment? These are some questions arises on our mind after the Friday market closed.


We are not going to point out, again and again, those Key Highlights of Budget 2019. We all know what are the highlighted points of Budget2019. We are going to Analysis the budget on stock market perspective and point out the sectors and stocks which are going to effect after the Budget 2019. This will give some clarity to the investors about the positive and negative factors of the union budget 2019.


How Budget 2019 will impact Indian Stock Market



Securities Transaction Tax (STT)
Government has proposed to relax the levy of Securities Transaction Tax (STT) by restricting it only to the difference between settlement and strike price in case of exercise of options. This can boost the trading volume in options and would be positive for the stock market and broking industry. Though the benefit is restricted till options later it can extend to other transaction also.


We can better understand this with this example say if your ITM (In The Money) option strike of say 11800 gets exercised on expiry with the spot at 11900- at present, you would have to pay STT of 11900*75*0.00125= Rs 1,116. Whereas now after the Budget STT would be (11900-11800)*75*0.00125= Rs 9. This will definitely cheer the Option traders in the stock market.  


PSU Banks- 
The government has proposed to infuse capital worth Rs 70,000 to PSU Banks is a positive for PSU Banks like Bank of Baroda, Union Bank, Canara Bank, Bank Of India, PNB and Allahabad Bank. The capital infusion will also be meant for technological development of PSU Banking sectors like- Online payment, Debit/Credit card, Net Banking, etc. Nifty PSU Bank index has shown a movement of 90 points on last Friday and closed marginally higher. 


A record recovery of over Rs 4 crore has been achieved in the last 4 years, mainly through NCLT. The provision coverage ratio is at its highest in 7 years and credit growth has improved to over 13 percent. The above developments are positive for PSU Banking sectors. Investors can start accumulating PSU Banks like Bank Of Baroda, Canara Bank, and PNB for the long term.


Infrastructure Sectors-
The Finance Minister Nirmala Sitharaman has proposed to invest Rs 100 lakh crore in the Infrastructure sectors over the next five years. Infrastructure push and rural development continue to remain the NDA government priorities. This move will help to create jobs in the economy and boost rural consumptions. This will benefit to stocks like L&T, NBCC, IRB Infra, Ultratech, DLF, and Dulip Bildcon Ltd


Rural India- 
Increased in spending on roads, affordable housing, promotion of zero budget farming, support to small business producing cattle feed, etc. The government’s initiatives to rural development and consumption could benefit companies like Godrej Agrovet, ITC, HUL


Foreign Direct Investment-
Finance Minister Nirmala Sitharaman, in her maiden Budget speech on 5th July, announced that the government will allow 100% Foreign Direct Investment (FDI) for insurance intermediaries. In addition, the government will also consider further opening up FDI in aviation and media. This may benefit the stock of Jet Airways, Spice jet, and other aviation and media stocks.


Har Ghar Jal by 2024-
Access to drinking water is a priority, said union finance minister Nirmala Sitharaman during her budget 2019 speech. The plan is to provide piped water across Indian households by 2024 and focus on managing the nation’s scattered water resources under the Jal Shakti Ministry. This is positive for the companies like Shakti Pump, Jain Irrigation, Kirloskar Brothers.


Negative factors of Budget 2019



There is also some negative news in the Budget 2019, Gold import tax has been raised from 10% to 12.5%. The result of which the jewelry stocks tanks after the announcement. The increase in public shareholding from 25% to 35% for listed companies could lead to the delisting of many MNC firms. TCS, HUL, Wipro, HDFC life are among those company need to sell their shares to increase public shareholding. More than 4 lakh crore worth of shares to be sold to increase the public shareholding. 


Increase in excise duty in Petrol and Diesel by Re1 will create a negative impact on oil marketing companies like BPCL, HPCL. Custom duty hike in indoor and outdoor split AC can be negative for Voltas, Whirlpool and Blue Start. Lastly, the hike in tax slab to super-rich people can slow down investment in the Equity market.


Conclusion:

There is both positive and negative side of  2019 Budget presented by the Finance Minister Nirmala Sitharaman. We have tried to analyze how Budget 2019 will impact on Indian stock market. We have mentioned all stocks and sectors that are going to impact due to Budget 2019. Indian stock market may remain volatile another couple of days due to Budget and then the market would move ahead.  

Also Read, Types of Risk Associated with Stock Market Investments

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Is a Demat mandatory for Intraday/ Futures and Options Trading?

Please share your opinion and views about the article and if you like the article please share with others

Happy Investing!

Finogyan Team



Budget 2019: Impact on Indian stock market Budget 2019: Impact on Indian stock market Reviewed by Finogyan on July 06, 2019 Rating: 5

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