Keeping within the constraints of fiscal consolidation, weak tax revenues, and a need to drive growth through investments, the Budget has provided positive market signals, said CLSA research report on market outlook post Union Budget.

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It believes that fiscal math appears optimistic as usual, but the expected 20-30 bps revenue shortfall can be mitigated by expenditure containment. PSU banks are the biggest beneficiary of the budget; non-banking PSUs appear the worst off. Bond yields should continue to trend down, and the INR outlook appears brighter, it added.

In the case of government raising foreign currency sovereign bonds, the research house thinks that it will significantly reduce the domestic bond issuances, driving the bond yields down.

"KYC norms for FPIs will be eased. Also, NRIs will get easier access to the Indian stock market. Lower bond yields should help FPI flows in the debt market as well. As such, portfolio flows and strategic flows should help the INR remain strong," the report said.

On the minimum public shareholding front, the brokerage said that the Sebi will take its time to evaluate and analyse the proposal, $35-40 billion of additional paper supply can hit the markets over the next 3-4 years if accepted. Impacted companies include TCS, Wipro, and HDFC Life.

It further added that a higher disinvestment target (up 23 percent YoY) and relaxed definition of government holdings imply an increase in the equity overhang on PSUs. This is an incremental negative for IOCL, BPCL, GAIL, Powergrid, and NTPC.

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