Budget 2024: What should be your Indian stock market and macro strategy ahead of Budget

  • Budget 2024: Upcoming budget is expected to be themed on fiscal prudence, capex spending to help create jobs and targeted social sector spending. FM Nirmala Sitharaman may retain fiscal deficit target at 5.1% of GDP in F2025, while being on track to attain the target of 4.5% of GDP by F2026.

Ankit Gohel
First Published11 Jul 2024, 12:13 PM IST
Budget 2024: What should be your Indian stock market and macro strategy ahead of Budget.
Budget 2024: What should be your Indian stock market and macro strategy ahead of Budget.

As Finance Minister Nirmala Sitharaman gears up to present the Union Budget 2024 budget, Indian stock market investors are strategizing their moves to navigate the anticipated fiscal policies.

The upcoming budget is expected to be themed on fiscal prudence, capex spending to help create jobs and targeted social sector spending. According to Morgan Stanley, FM Sitharaman may retain the central government’s fiscal deficit target at 5.1% of GDP in F2025, while being on track to attain the target of 4.5% of GDP by F2026.

It also expects the focus to remain on capex expenditure over revenue expenditure and targeted social sector spending with focus on improving access to physical, social and digital infrastructure. The budget is also estimated to provide a road-map for a medium-term plan for fiscal consolidation beyond FY26.

Also Read | Budget 2024: Expect fiscal deficit target to be retained at 5.1% in FY25

Stock market performance around budget

According to Morgan Stanley analysis, the stock market falls on two of three occasions in the 30 days post the budget. The probability of such a fall rises to 80% if the market has risen in the 30 days preceding the budget. Only twice in 30 years has the Indian stock market been up both pre and post the budget.

This year, India is tracking higher on both an absolute and relative basis and if it were to hold this performance into the budget day, then there is a strong likelihood that it corrects post budget, the analysis said.

Equity Market Strategy

The impact of budget on the Indian stock market has diminished over time, but market performance often hinges on pre-budget expectations. Currently, there is a palpable sense of exuberance in the stock market, which may lead to volatility and potential corrections post-budget.

Also Read | Budget 2024: Disinvestment & asset monetization target to be at ₹50,000 crore

According to Morgan Stanley, Indian stock market investors should focus on these three thing:

Fiscal Consolidation: For the market, the extent of fiscal consolidation will be crucial. Any deviation from the fiscal deficit target, even by 0 to 10 bps of GDP, can influence the stock market. According to Morgan Stanley, a contraction in the fiscal deficit below 5% may not please the equity market.

Infrastructure Spending: A 20-25 bps increase in GDP spending on physical and social infrastructure over the interim budget could also impact the market dynamics.

If the government focuses on consolidating the fiscal, Morgan Stanley expects financials to outperform. If it prefers spending (rural and infrastructure spending), consumer discretionary and industrial stocks will likely fare better. The brokerage firm is overweight on all three sectors.

Also Read | Budget 2024 Expectations Live: Salaried Class expects higher standard deductions

Sector-Level Incentives: Morgan Stanley believes the market could be surprised by the lack of major tax cuts or redistribution spends. It does not expect major changes to capital gains tax rates for equities. Specific sectoral incentives and spending will be crucial.

Morgan Stanley remains overweight on Financials, Consumer Discretionary, Industrials and Technology and underweight on all other sectors.

Macro Strategy

The projection of budget deficit suggests no significant changes in the gross and net issuance of government securities (G-Secs). The demand for G-Secs remains strong, driven by foreign investor interest, particularly due to India’s inclusion in the JPMorgan GBI-EM index. Despite no anticipated rate cuts, Morgan Stanley views the Indian Rupee (INR) and G-Secs as attractive carry trades.

It recommends short CNH/INR and TWD/INR and long 10-year G-Secs with FX hedge.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess

News in Numbers

Numbers that help you understand news better
$5 M

394,000

$112 B

12.1%

₹133.50 Cr

₹12,300 Cr

$136 M

First Published:11 Jul 2024, 12:13 PM IST
HomeMarketsStock MarketsBudget 2024: What should be your Indian stock market and macro strategy ahead of Budget

Most Active Stocks

Indian Oil Corporation

174.50
03:59 PM | 11 JUL 2024
2.55 (1.48%)

Tata Steel

169.00
03:58 PM | 11 JUL 2024
1 (0.6%)

Bharat Petroleum Corporation

306.60
03:59 PM | 11 JUL 2024
6.25 (2.08%)

Oil & Natural Gas Corporation

304.80
03:57 PM | 11 JUL 2024
6.75 (2.26%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

Gujarat Pipavav Port

236.60
03:58 PM | 11 JUL 2024
16.85 (7.67%)

Oil India

551.45
03:58 PM | 11 JUL 2024
38.7 (7.55%)

Mazagon Dock Shipbuilders

5,739.10
03:55 PM | 11 JUL 2024
383.7 (7.16%)

Great Eastern Shipping Company

1,455.65
03:58 PM | 11 JUL 2024
93.9 (6.9%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    73,705.000.00
    Chennai
    74,722.000.00
    Delhi
    73,705.000.00
    Kolkata
    74,722.000.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    102.86/L0.00
    Chennai
    100.75/L0.00
    Kolkata
    104.95/L0.00
    New Delhi
    94.72/L0.00
    OPEN IN APP
    HomeMarketsPremiumInstant LoanMint Shorts