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Adani companies crash FM Sitaraman’s B-day party –

It was a rough ride on Dalal Street. The market initially gave a thumbs up to the Budget proposals on Wednesday and pushed the sensex up by over 1,200 points soon after the FM’s speech was over with the index nearing the 61k mark. However, strong selling in Adani stocks affected trade sentiment in mid-session and brought the whole market down after a report said that Credit Suisse had stopped accepting bonds issued by the group companies as collateral. As a result, the index dived nearly 2,000 points from the day’s high. However, bargain hunting late in the session, mainly by foreign portfolio investors, helped the sensex close with a modest gain of 158 points at 59,708 points.
According to Kotak Mahindra Mutual Fund MD Nilesh Shah, through the Budget proposals, the FM aims to achieve fiscal prudence with lower deficit and the path has been set till FY26. “Consumption is supported through tax cuts. Investment outlay is enhanced. Budget numbers are realistic to enhance the (government’s) credibility,” Shah said. “The Budget could have focused more on asset monetisation but that can be pursued otherwise also depending upon market conditions,” he added.
During the day, FPIs turned net buyers after selling aggressively in the three previous sessions, during which they had net sold stocks over $2 billion. During the day’s session, foreign funds were net buyers at Rs 1,785 crore, BSE data showed. Domestic funds too were net buyers with a net inflow figure of Rs 529 crore.
According to HDFC Securities MD Dhiraj Relli, market players were happy since it was a growth-oriented Budget and the way the finance minister clearly spelt out the maths behind the proposals. The FM also didn’t have any proposal that was negative for any sector except for insurance, he said.
“Fear and concerns related to the Budget that exist in the run-up to any Budget is behind the market and hence we saw a relief rally soon after the FM’s speech was over,” Relli said. “I expect the government’s capex plans would be front-loaded,” he said.
Although D-Street investors were bullish about the long-term impact of the Budget and blue chips closed with gains, strong selling was visible outside of the index stocks. As a result, the selling left investors poorer by nearly Rs 4 lakh crore with the BSE’s market capitalisation now at Rs 270 lakh crore.
One sector that was hit hard by the Budget was life insurance. To plug a tax loophole that was being used by rich investors to enjoy tax arbitrage, the FM imposed a tax on returns from some savings products sold by life insurance companies. As a result, HDFC Life and ICICI Prudential Life Insurance lost 11% each, Max Financial lost 10%, SBI Life lost 9%, while LIC closed with an 8% loss.
According to Relli, the sharp drop in stock prices of these companies was a knee-jerk reaction to the FM’s proposals. “These stocks are now being re-rated and some of these companies would now need to have a re-look at their business model.”
One of the notable gainers in the stock market was ITC, which gained despite the Budget proposing a marginal rise in one of the cesses that cigarette companies pay. The stock gained 2.6% to close at Rs 361, a life-high level. Other sensex gainers included Tata Steel, ICICI Bank and TCS, while the laggards included Bajaj Finserve, SBI and IndusInd Bank.
In the forex market, the rupee continued to weaken, mainly on the back of the massive FPI selloff in the stock market in the last few sessions. As a result, the rupee closed at 81.93 to the dollar, weaker by 43 paise over the day.
For Thursday, two developments will decide the market’s trend. The late Wednesday decision by the Adani Group to call off its Rs 20,000-crore FPO is expected to have some major impact on the stock market, especially the group’s stocks.
Second, late on Wednesday the US Federal Reserve is set to announce its decision on interest rates in the world’s largest economy.