Indian stocks spiralled higher on Monday, logging their best budget day gains in 22 years, after the government pushed all the right buttons to revive the Covid-19 hit economy. Investors were also relieved that the revenue-starved government refrained from raising taxes on the rich to fund its expansive spending plans. The bond market however paid the price for the Centre’s decision to borrow more to finance the widening fiscal deficit.
Reversing a six-day losing run, the Sensex shot up 2,315 points or 5% to close at 48,600.61. The Nifty soared 646.60 points or 4.7% to close at 14,281.20. Both indices posted their best budget day gains since 1999 and the highest single-day advance since April 7, 2020. The gains on Monday added ₹6.8 lakh crore to investors' wealth.
Finance minister Nirmala Sitharaman raised spending on infrastructure and health, while announcing proposals to clean up banks’ books. The steps clearly lifted drooping investor sentiment as the market has been losing ground of late led by foreign portfolio outflows. In the six trading days till Friday, stock indices had dropped almost 8% from their all-time highs. Worries that the government might introduce a cess or tax the rich to raise funds too kept investors on edge.
Foreign investors cheered the budget proposals, picking up stocks worth ₹1,494 crore after selling shares worth a net ₹9,000 crore in the last six sessions.
The government’s higher spending plans however did not go down well with the bond markets. Yields on the benchmark bond surged as much as 17 bp as investors sought RBI intervention to arrest the market crash.