Budget 2023: Stock market investors anticipate balanced budget, job creation, infrastructure spending

Stock market investors anticipate a balanced Budget with an emphasis on job creation, increased infrastructure expenditure, containing the deficit, and restarting the economy on January 25, PTI quoted analysts as saying.

Stock markets have been relatively quiet in the run-up to the Union Budget, with the BSE's benchmark Sensex remaining nearly flat this month. Even the corporate earnings season failed to thrill the markets, albeit several indices, such as IT and banks, saw favourable movement.

Foreign Portfolio Investors (FPIs), who are shifting money out of India in search of emerging markets with lower valuations, may be to blame for the markets' subdued performance. So far this month, they have removed more than $16,500 crore from domestic equities.

Additionally, investors continue to be concerned about inflation and a potential global recession.

Equity investors are anticipating a consistent tax structure for capital gains, which might help taxpayers have more disposable income, from the pre-election year Budget 2023, according to Narendra Solanki, Head-Equity Research at Anand Rathi Shares & Stock Brokers.

Investors are thinking about policy changes to rationalise growth bottlenecks like subsidies, a clear roadmap for disinvestment targets, and accelerating the eagerly anticipated PSU privatisation or consolidation, he added. Investors will also be looking for fiscal consolidation, which is necessary for financial stability in the economy.

History predicts that India's stock market will be quiet before the government Budget reading, which is generally held on February 1.

Overall, six of the last ten years have experienced pre-budget rallies, and six of those ten years have also seen post-Budget market declines. Additionally, the Nifty 50 benchmark index of the National Stock Exchange (NSE) has decreased seven times on budget days.

The government's financial situation, as well as the projected costs and revenues for the upcoming year, are presented in the budget.

According to common consensus, stock markets may benefit if a budget contains policies that are viewed favourably by businesses and the economy as a whole.

On the other side, a Budget may have a negative effect on stock markets if it contains measures that are perceived as bad for businesses and the economy. Stock markets may also be impacted by statements or modifications on interest rates, taxes, and government spending.

"The impact of the upcoming Budget would depend on the actual budget proposal and markets will be keenly watching the fiscal deficit for FY24. A figure above 6% will disappoint the market. But this is unlikely," V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

A potential increase in the capital gains tax, he continued, may have a detrimental effect on the market.

The markets will rise in response to any good news that will significantly boost the economy or give the salaried class and/or corporations more disposable income. JARVIS Invest's founder and CEO, Sumit Chanda, stated.

"Any changes to the tax slab of the salaried class or any incentive to the corporates for capex or reduced taxes will be viewed positively and one can expect the markets to rally post the Budget," he added.

Additionally, disinvestment, expanding the PLI (Product-Linked Incentive) programme, reducing tax slabs, and encouraging private and public spending are some of the policies that could have a good impact on the market, according to ANMI President Kamlesh Shah.

According to Vijayakumar of Geojit, the Budget's effects won't last long. Market patterns would be increasingly influenced by changes in the global economy, especially in the United States. Markets will rise if the Fed's post-meeting remarks are dovish and U.S. inflation statistics point to a decline.

In contrast to the ambitious estimates of previous Budgets, the government is likely to be conservative in its asset monetization ambitions, according to Amar Ambani, Head of Institutional Equities at Yes Securities. Given the adverse global environment, India's GDP growth objective is almost certainly going to be in the low double digits, and the government won't deviate from its fiscal responsibility plan.

Market analysts predict that the budget will have a positive impact on the following industries: healthcare, fertiliser, infrastructure, defence insurance, manufacturing, digitalization (IT), communication, education, small and medium enterprises (SMEs), etc.

Also Read: Union Budget 2023 LIVE updates: Finance Minister Nirmala Sitharaman to table budget today