Which areas can rally in this budget? How is the market trend before and after the budget

However, past data of nearly a decade suggests that markets tend to rally in anticipation of the Budget but enter a bearish tone after the announcement. However, most of the time, Market Has given positive response to pre and post budget announcements. Will this trend continue in Budget 2023 as well? And which sectors are likely to benefit this time?

Explaining the market performance in framing and post budget trading over the last 5 or 10 years, Divam Sharma, founder of Green Portfolio, a SEBI registered portfolio management service provider, said, “It is mostly rumor buying and news selling for many sectors. PSUs, PSBs and Railway players are directly affected.”

Sharma said, “We have seen many sectors rallying in double digits in anticipation of the budget. Budget And perform poorly for the next one month. We have seen this trend four times in the last five years.”

In the last five years since the announcement, on an average, the Nifty 50 has given a negative 2.8% one-month return.

Meanwhile, according to Sonam Srivastava, founder, Wright Research, a SEBI registered investment advisor, the market has fallen five times in the past 11 years, gaining six times in the month ahead of the Union Budget and swinging between -3 and +3%. has gone. , The budget day has been positive most of the times and the post budget has been more positive than negative.

So what can stock market investors expect from Budget 2023?

According to Sharma, this budget should be a populist budget as elections are due next year.

He said, “In the last 4 years, we have not seen income tax slab soaps for the public, we can expect some soaps this time in the pre-election budget soaps, which will also include spending for the rural economy, which has been in the past few years.” experiencing stress over time. 1 year, populist welfare schemes, and spending on health infrastructure.”

This time also the focus is expected to be on growth. “Manufacturing as a trend has been successful through various policies including PLI, it should see further expansion,” he added.

Further, Sharma said, “As we expect a capex cycle in the coming years and as the government seeks to attract the creation of capex, industrial parks, sops for manufacturers, spending on infrastructure creation is on the radar.” Renewable energy will be on the radar, to reduce energy cost to GDP, ensure energy security and reduce import burden. This will be taken forward through concessional announcements related to solar, public transport, EV “

Whereas, this year, Srivastava said, “We see pre-budget buying in stocks that may be budget-friendly but at the broader market level, volatility may remain. Announcements in the budget could be crucial – if the budget turns out to be too populist.” It may hurt sentiments while a more cautious budget may be more welcome.”

Meanwhile, Anil Rego, founder and fund manager of Right Horizons, believes that the upcoming budget is the last before the elections in 2024, so mainly through improvements in infrastructure, manufacturing and exports, and tax benefits for investors. The focus will be on development. and taxpayers.

Which sectors are expected to benefit the most from Budget 2023?

Market investors can expect the government to support capex, infrastructure creation and import substitution to ensure higher GDP growth in the coming years, according to the founder of Green Portfolio.

With regard to the energy and power sector, the world has seen the importance of energy security and lower energy costs as a percentage of GDP. Companies offering services related to distribution, production, equipment and EPC will benefit from the growth in infrastructure. In addition, allied sectors including EPC, cement and steel will benefit considering the government’s emphasis on infrastructure creation.

In addition, manufacturing-related (PLI) sectors such as textiles, pharma, automobiles and chemicals may benefit from further thrust by the government.

Along with this, the defense manufacturing sector will also be on the radar. Sharma is hopeful that the government will promote local manufacturing and exports of defense equipment.

On the defense sector, Ashwin Patil, senior research analyst, LKP Securities, said, “The defense sector, as is a wish list before the budget every year, has a significant outlay with an emphasis on indigenization, which means on local production.” GOI definitely does a lot for this sector every year, also on the R&D side where they plan to spend a huge amount. So this year also we expect them to do space and research, electronic components and so forth. Expect to announce a significant budget for Unnati. Localization.”

Patil further said, “On PLI schemes, we would say that the Government of India is promoting healthy competition in the defense sector by launching various PLI schemes. This will definitely improve the quality of defense products and services and will lead to more growth in the defense sector. Also, the country needs to improve its space research, due to which we believe that further PLI plans will be more focused on space research.”

In addition, Sharma has further pushed for the banking sector through efforts towards financial inclusion, rupee-denominated businesses and focus on technology implementation. Notably, the government is already working on a single technology application for all PSBs for on-lending.

Therefore, according to the founder of Green Portfolio, energy, defense and infrastructure will be the focus of the budget as the focus will be on long-term growth, fiscal consolidation and reducing the current account deficit relative to GDP.

A boom can also be seen in the realty sector. According to Rego, the government is expected to increase the tax slabs from the current levels. If this happens, it will leave more disposable income in the hands of consumers, which will lead to the growth of the economy. Also, additional incentives are expected to increase affordable housing. At present, the maximum deduction that homebuyers can claim is 2 lakh on the annual interest paid on the housing loan. In the upcoming Union Budget, home buyers expect this limit to be increased Five lakhs

In Srivastava’s view, the focus will also be on improving the ease of doing business. 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 and focus on disinvestment and reduction in subsidies.

The tax structure for capital gains is expected to be discussed in the upcoming Union Budget. “This can help Indian taxpayers get more disposable income, which can be channeled into investments and used efficiently,” Rego said.

Rego also highlighted the expectation of tax exemption on interest paid on personal loans and education loans, which form a major part of the credit basket. Burdened by inflation and rising rates, this relief will spur credit growth and spending. Food and fertilizer subsidies account for about one-eighth of India’s 39.45 trillion rupees in total budget spending this year, and the government may make cuts to control the fiscal deficit during the pandemic. The Society of Manufacturers of Electric Vehicles is demanding expansion of EV subsidy under the FAME-II scheme and inclusion of light to heavy commercial vehicles to promote electric mobility.

Will the same sectors rally in Budget 2023 like the last one?

Sectors such as banks, capital goods, FMCG, pharmaceuticals, IT, real estate and metals performed well in the previous budget.

In this Budget 2023, Sharma expects banks, capital goods and pharma to pick up after the budget announcement. Real estate will get some favorable benefits if tax deduction benefits can be announced. Metal infra and energy related stocks may rally not because of the announcement specifically, but because of China’s reopening and factors impacting the global economy.

However, the green portfolio is not expecting a boom in the IT sector.

Finance Minister nirmala sitharaman Will announce the budget 2023 on February 1 this year. From last budget till date, Sensex and Nifty 50 have gained between 2.5-3%.

Disclaimer: The views and recommendations given above are 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.