Stock market investors expect a balanced budget with a focus on job creation, increased infrastructure spending, managing the deficit and reviving the economy, experts said Wednesday.
Equity markets have been subdued ahead of the Union budget as BSE’s benchmark Sensex is nearly flat so far this month. Even the corporate earnings season failed to excite markets, while some indices, such as IT and Bankex, showed some positive moves.
The markets’ weak performance could be due to foreign portfolio investors (FPIs) pulling funds away from India as they seek emerging markets with cheaper valuations. They have raised more than Rs 16,500 crore from domestic stocks so far this month.
In addition, inflation and the potential global recession continue to preoccupy investors.
Narendra Solanki, Head of Equity Research Anand Rathi Shares & Stock Brokers, said investors are expected to remain focused on three key factors from the 2023 Budget pre-election year. First, equity investors expect a unified tax structure for capital gains that will make taxpayers more spendable. income.
Second, investors will look for fiscal consolidation necessary for financial stability in the economy and third, investors anticipate policy reforms to rationalize bottlenecks to growth, such as subsidies, a clear roadmap for divestment targets, and accelerating the much-anticipated PSU privatization or consolidation. he added.
History suggests that trading in Indian stocks is likely to be muted ahead of the union budget reading, which is usually held on February 1.
Overall, the pre-budget rallies have been seen in six of the last 10 years, and post-budget the market has fallen six times in the last 10 years. In addition, the benchmark index Nifty 50 of the National Stock Exchange (NSE) fell seven times on Budget Day.
The Budget is a representation of the state of affairs in the government’s books and the expected expenditure and income for the coming year.
It is widely believed that if a budget contains measures that are considered positive for businesses and the economy in general, it can have a positive effect on stock markets.
On the other hand, if a budget includes steps that are considered negative for businesses and the economy, it can negatively impact stock markets. In addition, announcements or changes in interest rates, taxes and government spending can also affect stock markets.
“The impact of the upcoming budget will depend on the actual budget proposal and markets will closely monitor the budget deficit for FY24. A figure above 6 percent will disappoint the market. But this is unlikely,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
He went on to say that one proposal that could have a negative effect on the market could be a potential capital gains tax increase.
Any positive news that has a meaningful impact on the economy or leaves more disposable income in the hands of the wage-earning class and/or corporations will propel markets up, said Sumit Chanda, Founder and CEO of JARVIS Invest.
“Any change in the paid class tax bracket or any stimulus to corporates for capex or reduced taxes will be viewed positively and markets can be expected to recover post-budget,” he added.
Moreover, push to private and government spending, divestments, expansion of product-linked incentive (PLI) scheme and tax cuts are some of the measures that can have a positive effect on the market, said Kamlesh Shah, president of ANMI. .
Vijayakumar of Geojit believes the impact of the budget will be short-lived. Market trends would be dictated more by developments in the global economy, particularly in the US. If the Fed’s comments after the February 1 meeting are mild and data shows that US inflation is declining, markets will recover.
Amar Ambani, Head – Institutional Equities, Yes Securities, said the government is likely to be modest in its asset monetization targets, contrary to the lofty projections of the previous budgets. In all likelihood, India’s GDP growth target would be a low-double-digit affair in a challenging global context, and the government would not deviate from its fiscally prudent roadmap.
According to market experts, healthcare, fertilizers, infrastructure, defense insurance, manufacturing, digitization (IT), communications, education, small and medium-sized enterprises (SMEs), etc. are expected to benefit from the budget.
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