Indian indices surged around 5 percent on Monday as investors cheered Budget announcements. The Sensex ended 2,315 points higher at 48,600 while the Nifty rose 646 points to settle at 14,281, led mainly by gains in banking, financial and auto stocks.

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The Nifty Bank hit its all-time high, up 8 percent after the FM announced measures to clean up the NPAs in the sector and announced it would privatise two public sector banks.

Here are the key reasons why Sensex surged over 2,300 points in trade today:

No COVID Cess, LTCG hike: The sentiment in equity markets were lifted on the back of no tinkering in capital gains taxes or STT or any form of COVID tax. Also, there were no changes in Direct taxes which were eyed by the markets. Markets had sold off in the run-up to the Budget on this fear and there is some evidence that a short squeeze help shares run higher.

Higher Spending: Sitharaman proposed a sharp 34.5 percent hike in capital expenditure to Rs 5.54 lakh crore in the financial year 2022 in order to push growth. The massive increase comes at a time when the country is looking to recover from the COVID-19 pandemic, as rising government spending is key to bringing the economy back on track. The government will also provide an additional Rs 2 lakh crore to states for capital expenditure over and above its own commitment.

Bank privatisation: The government will sell stake in at least two public sector banks as part of its privatisation plan in the next financial year. The government will bring necessary legislative changes in this parliamentary session to enable this divestment plan, FM said.

Bad Bank: FM announced plans to set up a new asset reconstruction company (ARC) and asset management company (AMC) as part of a strategy to clean up banks’ balance sheets. Announcing its version of the bad bank, the government will set up an Asset Reconstruction and Management Company to take over bad loans. A bad bank will act as an aggregator of all stressed assets in the system.

Hike in FDI in insurance: Nirmala Sitharaman increased the foreign direct investment limit for the insurance sector to 74 percent from 49 percent earlier. Foreign Direct Investment cap in the insurance sector was first raised to 49 percent from 26 percent in March 2016, but industry experts were of the view that it did not enthuse foreign investors as they could not get management control.

Scrappage policy: Nirmala Sitharaman announced a voluntary vehicle scrapping policy to phase out old vehicles. Under the scrappage policy, Sitharaman said that there will be a fitness test for vehicles after 20 years in the case of personal vehicles and 15 years in the case of commercial vehicles.

First Published:Feb 1, 2021 3:52 PM IST