Union Budget 2023-24: What are the pre-budget expectations for stock market?

Market


The Union Budget for 2023–24 will be presented by Finance Minister Nirmala Sitharaman in the Lok Sabha on February 1 against a range of expectations from various industries, including the stock market. This budget is anticipated to have a strong emphasis on long-term development while attempting to fortify the financial system. Energy, healthcare and pharma, specialty chemicals, technology, and manufacturing are going to be the emphasis of this budget, which is likely to be focused on infrastructure development, empowerment, digitalization, and incentivizing new-age production through PLI programmes. What are the pre-budget forecasts for the stock market, despite the fact that the market has responded favourably in advance of Budget 2023? Experts anticipate that the market will most likely respond to the earnings season and the Budget announcement. Here are the forecasts for the stock market from Union Budget 2023–24, based on an exclusive conversation with Sonam Srivastava, Founder at Wright Research, a SEBI Registered Investment Advisor.

1. Union Budget 2023 expectations for Stock Market investors?

Budget 2023 is likely to continue to focus on capital expenditure as a growth driver and give an impetus to manufacturing while continuing with the post-pandemic fiscal consolidation. The finance minister will try to boost capital expenditure further from the current 2.9% of GDP to nearly 3.5%. She might also rationalise personal income-tax rates to lift demand. The focus will also be to improve the ease of doing business. The Budget is expected to continue the focus on domestic manufacturing revival and PLI schemes for labour-intensive sectors are likely. Most importantly instead of going populist the Budget is expected to continue to focus on post-Covid fiscal consolidation and focus on divestment and reduction of subsidies.

2. What are the sectors that would be benefiting the most from the budget 2023?

With the budget coming at the beginning of 2023, the sectors that the government is looking to focus on – manufacturing, capital goods, defence, sustainability, railways, and public sector banks are already seeing fresh investments. We expect these sectors to continue to be in the spotlight.

The theme of chasing stocks getting government Capex and incentives from the PLI scheme will outperform in the run-up to the budget. Even though this is the last budget before elections we might not see the government go populist but instead focus on fiscal consolidation in light of global volatility.

3. How have markets performed in pre & post Budget trade in the last 5 or 10 years, trends for this year, and more?

The market has fallen five times while gaining six times in the month ahead of the Union Budget in the last 11 years and has oscillated between -3 and +3%. The budget day has been positive most of the times and the post-budget has been more positive than negative.

This year we see a pre-budget buying in stocks that might be favoured by the budget but on the broader market level, the volatility could persist. The announcements in the budget could be crucial – if the budget is too populist it might hurt sentiments while a more cautious budget might be more welcome.

4. Do you expect that the same sectors that saw a rally after the last budget—banks, capital goods, FMCG, pharmaceuticals, IT, real estate, and metals—will do so again?

We do expect the banking, manufacturing, and capital goods to rally after the budget. The focus will be on infrastructure development, empowerment, digitization and incentivising new-age manufacturing through PLI schemes. We expect energy, healthcare and pharma, speciality chemicals, technology and manufacturing to rally this time after the budget.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.


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