VMPL
New Delhi [India], September 30: The Indian economy has been showing signs of robustness as the financial markets continue to reflect positive investor sentiment. With rising investor participation in the country’s financial markets, all eyes this year were on the Union Budget 2024. You may have observed significant market volatility when the budget was being announced. So, what’s in it for you as an investor? Let’s get some equity market insights post the Union Budget 2024.
What are the Market Reactions Post Union Budget 2024?
The Union Budget has historically played a major role in driving stock market movements. On budget days, markets tend to fluctuate significantly based on the announcements. Some stocks see major price gains, while others see significant drops. This largely depends on the budget’s provisions for various key sectors in the country.
In the last decade, the BSE Sensex has closed higher six times following the budget. However, the remaining four times, it ended in the low. This year, after FM Nirmala Sitharaman presented her 7th Budget, the BSE Sensex fell 73 points to close at 80,429.04. The Nifty fell by 30 points to reach 24,479.05. This is because while investors were expecting rationalisation of capital gains tax, the budget announced a slight increase in short-term as well as long-term capital gains tax.
Short-term capital gains tax on equity-based assets has been increased from 15% to 20%. Similarly, long-term capital gains tax on these assets has risen from 10% to 12.5%. However, the exemption limit for long-term capital gains has been raised to Rs1.25 lakh per year, up from Rs1 lakh. The Security Transaction Tax (STT) on derivatives has also gone up. It will now be 0.1% on the sale of options, up from 0.0625%, and 0.02% on the sale of futures, up from 0.0125%.
Expert Take: What Market Analysts Are Saying About the Post-Budget Outlook
Following the Union Budget 2024, market analysts sighted many good opportunities for investment. The government’s focus this year has been on driving growth, as could be seen through increased spending on agriculture, skill development, financial inclusion, and infrastructure. Sectors like agri-tech, railways, and defence are slated to benefit in the near term.
From a long-term investment perspective, non-banking financial companies (NBFCs) and banks offering loans to MSMEs are well-positioned, considering that the budget has focused on financial inclusion.
Infrastructure and engineering companies that receive government orders may also benefit in the long term. With the government prioritising infrastructure development, these sectors are expected to see some growth in the coming years.
The Equity Market in a Global Context: How International Trends Are Influencing Indian Markets
In the global context, rising interest rates in the US and Europe could be a cause for concern for the Indian markets. Higher interest rates in these economies could lead to foreign investors withdrawing capital from emerging markets like India. This generally results in short-term fluctuations in stock prices. Therefore, you must plan your stock investments by considering the associated risk factors.
There have also been other global factors such as supply chain disruptions and geopolitical tensions. Such events could have a direct impact on certain sectors such as IT and pharmaceutical companies, which rely heavily on exports.
Navigating the Future: Key Takeaways for Equity Market Investors
While the Union Budget may cause short-term fluctuations in the equity market, it is important to consider the long-term outlook from an investment perspective. While continuing to invest, you must keep a close eye on changes in government policies and macroeconomic conditions. If you want to manage your portfolio effectively, it will also make sense to take a regular stalk of sector-specific trends, such as those benefiting from government spending or facing challenges.
To enhance your investment journey, you can consider going through some reliable resources, such as those available on Sharekhan Knowledge Centre. These offer valuable insights to help you tread the equity markets with caution and modify your strategy based on evolving policy and market conditions.
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