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

1. Expectations of stock market investors from Union Budget 2023?

Budget 2023 is likely to continue to focus on capital expenditure as a growth driver and ramp up manufacturing while continuing post-pandemic fiscal consolidation. The finance minister will seek to increase capital expenditure to around 3.5% of GDP from the current 2.9%. She may also rationalize personal income tax rates to increase demand. Improvement in Ease of Doing Business will also be taken care of. The budget is expected to continue to focus on domestic manufacturing revival and is likely to have PLI schemes for labour-intensive sectors. Most importantly, instead of being populist, the budget is expected to focus on post-Covid fiscal consolidation with a focus on disinvestment and subsidy reduction.

2. Which sectors will benefit the most from Budget 2023?

With the budget due in early 2023, the sectors 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 limelight.

Government capex achievers will do better in the run-up to the budget chasing stocks and stimulus from the PLI scheme. Even though this is the last budget before the elections, we cannot see the government turning populist, instead focusing on fiscal consolidation in the light of global volatility.

3. How have markets performed in the last 5 or 10 years before and after the budget, trends this year, and much more?

In the last 11 years, the market has fallen five times and swung between -3 and +3%, gaining six times in the month before the Union Budget. Budget day has been positive most of the time and post-Budget has been more positive than negative.

This year we see pre-budget buying in stocks which may favor the budget but may remain volatile at the broader market level. Announcements in the budget can be important – if the budget is too populist it can hurt sentiments while a more cautious budget can be more welcome.

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

We expect banking, manufacturing and capital goods to pick up after the budget. The focus will be on infrastructure development, empowerment, digitization and encouraging new age manufacturing through PLI schemes. We expect energy, healthcare and pharma, specialty chemicals, technology and manufacturing to pick up this time after the budget.

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.