Decoding FM Sitharaman’s Budget 2024: What the Stock Market Wants and Fears Revealed!

Unlock the secrets of Budget 2024 with our comprehensive analysis on the Indian stock market. Dive into the expectations, fears, and potential market impacts as Finance Minister Nirmala Sitharaman unveils the budget. Stay ahead with key insights into fiscal consolidation, tax reforms, and market dynamics, ensuring you're well-informed for the financial year ahead.

As we eagerly await Finance Minister Nirmala Sitharaman’s budget presentation on February 1, 2024, the stock market is buzzing with expectations and concerns. In this blog, we delve into the key points that Moneycontrol has identified, shedding light on what the market wants to hear and, perhaps more crucially, what it hopes to avoid.

As market participants don their macroeconomic hats, the focus shifts from terms like liquidity and order wins to high-sounding fiscal consolidation and tax revenues. Let’s explore the market’s wishlist:

Continued Capex Push Going into FY25 in budget 2024:

• Why: With the private sector showing reluctance in capacity expansion, the onus falls on the government to keep the economic wheels turning. Increased government spending on infrastructure is expected to benefit companies in sectors like capital goods, engineering, steel, and cement, fostering job creation and boosting consumption.
• Will it come through: The market remains uncertain due to the government’s fiscal deficit target of 5.4 percent in FY25. Balancing aggressive capex with fiscal responsibility poses a challenge.

Higher Threshold for Personal Income Tax, Rebates:

• Why: Inflation has dampened disposable income, affecting consumption. Tax relief for the middle class could uplift sentiment, boost discretionary spending, and please voters in the lead-up to elections.
• Will it come through: Recent state poll results suggest the government may not feel immediate pressure. However, past precedent indicates that tax rebates have been increased in interim budgets.

Increased Allocation to Rural Schemes:

• Why: The rural economy is recovering slowly from the aftermath of the COVID slowdown, evident in weak sales of two-wheelers, consumer durables, and fast-moving consumer goods.
• Will it come through: Likely, as sustainable economic growth requires participation from all consumer segments. The upcoming elections add further impetus.

What the market hopes to avoid:

Increase in Securities Transaction Tax:

• Why: This move could impact day-traders’ margins, affect liquidity, and dampen market sentiment.
• Will it come through: Unlikely, as the government is cautious about upsetting the stock market, especially when the benefits are not substantial in the broader context.

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Hike in Long-Term Capital Gains Tax:

• Why: Historical trends show market sell-offs whenever there are adjustments to long-term capital gains tax.
• Will it come through: Not immediately anticipated, but market participants foresee the possibility in the July Budget.