(Bloomberg) -- Indian shares climbed after the government's federal budget maintained the status-quo on tax breaks for equity investments, allaying investor concerns. The benchmark Sensex had its biggest budget-day gain since at least 2006 and closed at the highest level since October.
Eighteen of the 30 Sensex members advanced as Maruti Suzuki India Ltd., India's biggest carmaker by sales, rose 4.8 percent to a record closing price. Tata Consultancy Services Ltd. dropped 2.8 percent, leading a second day of decline for software exporters, on concerns that the change in U.S. work visa rules will increase wage costs and narrow profit margins.
“The market cheered the budget speech as it didn't have any negatives that were expected, such as dilution in tax exemptions for equity investors,” said Sushant Kumar, a fund manager at Mumbai-based RAAY Global Investments Pvt. “Short covering pulled” it up, according to Kumar.
| Index | Change (%) | Size and Scope |
|---|---|---|
| Sensex | +1.8 | Steepest in two months |
| BSE Realty | +4.8 | Most since March 2016 |
| BSE IT | -1.3 | Lowest in two months |
Read here: Modi's Budget Holds Key to Burnish Outlook for India Stock Flows
The S&P BSE India Realty Index, a gauge of 10 property developers, rose the most since March 2016 on budget proposals such as a boost for affordable housing projects. The index advanced the most among 13 sector gauges compiled by BSE Ltd. The S&P BSE Information Technology index dropped the most, extending two-day decline to more than 4 percent.
“Affordable housing developers will now be eligible for several government incentives, subsidies, tax benefits and most importantly institutional funding,” said Neeraj Bansal, a partner at KPMG in New Delhi.
The Sensex capped its best gain last month since July 2016 as overseas investors bought a total $293 million of local shares in each of the last two weeks, the first such successive purchase since Oct. 7.
“Unchanged taxes and strong fiscal-deficit target in the budget will lead to foreign investors entering fresh longs or annulling their shorts,” said Nikhil Khandelwal, managing director of institutional equities at Mumbai-based Systematix Shares & Stocks Ltd. The budget will boost consumer demand in rural India, “a big positive” for consumer staples and discretionary companies, according to Khandelwal.
Read: Modi to Spend More on India's Poorest With Eye on Elections
Summary
- Bharat Financial Inclusion (BHAFIN) +8.9%, Mahindra Financial (MMFS) +7.2% are top gainers on BSE 200 index; boost to affordable housing is positive non-bank finance companies, Angel Broking Chairman Dinesh Thakkar says
- InterGlobe Aviation (INDIGO) -7.4% after net income surprisingly dropped
To contact the reporter on this story: Ameya Karve in Mumbai at akarve@bloomberg.net. To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Todd White
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