Finance Minister Nirmala Sitharaman presented the last Interim Budget 2024-25 before the elections, which largely remained in line with expectations and focused on fiscal consolidation, infra, agri, green growth, and railways.
The government’s demonstration of fiscal prudence in the Budget has been hailed as a positive development for both the economy and the stock market, according to experts.
While experts acknowledge the overall positive impact of the Budget on the market, they also highlight that the lower-than-expected infrastructure spending may have led to some disappointment among investors.
Analysts believe that there is going to be a period of consolidation post budget week. “ So, February 1 the budget was delivered, the market chart reacted the way it had to react, we believe that post budget there is going to be a period of consolidation. A consolidation could be in the range of just beyond the lower side 21,600 to 21,700 and 21,900 to 22,100 on the higher side,” Gaurang Shah, Senior Vice President, Geojit Financial Services, told Livemint.
Vinod Nair, Head of Research of Geojit Financial Services in an interview to Mint’s Vaamanaa Sethi, said that short-term volatility in the Indian stock market is likely to escalate as the election day approaches . The ongoing pre-election rally, though robust, is anticipated to persist until the result day.
Excerpts from the interview:
How is the market likely to perform post budget week?
The event proceeded smoothly without any significant setbacks, and the FM’s optimistic remarks about future measures have spurred anticipation for the final budget. We are in the pre-election rally, which is expected to hold. However, the market has been on the run since December 2023, post-state election outcome; the broad market is up by 10%. It is reasonable to expect some consolidation in the short term. The market is also likely to move in tandem with the global trend in the absence of a domestic trigger being at the end of the Q3 results.
How has the Interim Budget impacted the market?
As the expectations were low, a unique of interim budget, there was no deep impact on the market. However, since there are no negatives and the government statements indicate a strong improvement in efficiency, like good growth in tax revenue and moderation in revenue expenditure, this has led to a good impression about the fiscal. This is expected to reduce the cost of borrowing in the future led by lower borrowing. The most positive effect has been the target to reduce the fiscal deficit to 5.1% in FY25.
Which sectors are likely to be in focus?
Evidently, the interim budget placed a spotlight on infrastructure, projecting a rise in capital expenditure to ₹11.11 lakh crore in FY25. Future attention is directed towards renewables and manufacturing. The key beneficiaries are likely to be electronic and electricals, mass production, including exports.
What can we expect from the stock market before elections?
Short-term volatility is likely to escalate as the mega event approaches. The ongoing pre-election rally, though robust, is anticipated to persist until the result day. Corporate Q3 results are in line with the forecast, indicating a slowdown in earnings growth on a QoQ basis. Similarly, the forecast for FY25 is moderating compared to FY23-24. Recently, volatility in the global market has also jumped in context to the possibility of a Fed rate cut in May. So, these factors will determine the domestic movement in the short term as valuation are high.
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Published: 06 Feb 2024, 10:55 PM IST