The Indian equity market is extremely cautious ahead of the Union Budget 2023 which is scheduled to present in the Lok Sabha on February 1. The benchmark equity index BSE Sensex has declined in nine sessions so far out of the 15 sessions of 2023. The 30-share index declined to 60,604 in the afternoon trade on January 20, 2023 from 60,840 on December 30 last year.
While retaining a cautious view on the Indian equity market, BNP Paribas in a report said that the lag effect of interest rate hikes should weigh on global growth even as the worst of inflation seems behind. China’s reopening and an increase in term deposit rates are likely to impact the flows into Indian equities.
However, Amit Jeswani, Founder and CIO, Stallion Asset believes that the rural economy has been the laggard within a strongly recovering economy. Demand in rural has struggled to revert back to the pre-Covid mean.
“A lot of push through job creation, facilities upgradation, infrastructure development and a spur in demand from the rural side would add a lot of stability and confidence within the economy. This would aid the consumer side consumption along with credit pick up support which would ultimately aid the economy and the simultaneously the markets well,” he said in an interaction with PMS Bazaar.
Jigar Mistry, Co-Founder, Buoyant Capital added that with GST now decided by the council of ministers, the budget has become more of an accounting exercise rather than a framework to introduce sweeping changes.
In calendar year 2023, Mistry believes that the market returns will likely be determined more by how the western world deals with its inflation, interest rate and potential recessionary concerns, rather than something relating to India’s fiscal budget.
“Nevertheless, walking on the path that the incumbent government has laid in the previous budgets will likely boost investors’ sentiment, resulting in higher domestic and international flows, thereby leading to higher valuations in the medium term,” he said.
Priyank Chandra, VP and Portfolio Manager, O3 Capital said the focus on manufacturing and infrastructure is already there and any further increase through increased allocation or policies would make the sentiments more positive. “Besides, any increase in MGNREGA could give some support to rural India--some impact could be there on market sentiment. This was reduced by 25 per cent in the last budget,” Chandra said.
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