Indian stock markets managed their first higher close in four years on a Budget day on Saturday. Optimism about Budget proposals seems to have been carried to Monday, with the Nifty ending at record closing high 8,957. Finance Minister Arun Jaitley's Budget proposals are seen as positive for infrastructure and private banks, but for some other sectors like tobacco and public sector banks, the Budget proposals are underwhelming, analysts say. As a result, sectoral reaction to Budget annoucements has been divergent.
1) ITC down 13 per cent in two sessions since Saturday:
In his Budget, Mr Jaitley hiked the excise duty on different categories of cigarettes by 15 per cent to 25 per cent. This was the fourth straight year of large tax increase for tobacco manufacturers. ITC shares fell over 8 per cent on Saturday and declined over 5 per cent today. ITC is the most influential stock in the Nifty, so the selloff in the stock has weighed on broader markets as well. Other tobacco stocks such as Godfrey Philips and VST Industries also closed with deep cuts.
2) Axis Bank up 14 per cent in two sessions since Saturday:
In his Budget, Mr Jaitley proposed to remove the distinction between FII and FDI within sectorial limit raising the composite cap for private banks to 74 per cent. According to Credit Suisse, the measure will be a big positive for private sector lenders such as Axis Bank and Yes Bank. It will also raise their index weights.