All eyes will be on Finance Minister Nirmala Sitharaman as she gets set to present the Union Budget for fiscal year 2024-25 in Parliament today. Markets will be closely watching for cues on spending plans, tax measures, privatization plans and other policy initiatives that could impact various sectors.
The previous session saw some profit booking ahead of the big event, with benchmark indices closing lower. However, indices are expected to take cues from the Budget in deciding the near-term trajectory. Any positive announcements around infrastructure spending, manufacturing push, healthcare, renewable energy or initiatives to boost job creation could provide support. On the other hand, tax measures like changes in long term capital gains tax rates have the potential to spook investors.
Sectors like capital goods, real estate, infrastructure, banking and NBFCs will be keenly watched for budgetary allocations and policy roadmap. Consumer and agri stocks will also be in focus given the government’s recent spending focus in these areas. Measures to boost rural demand and put more money in the hands of farmers could boost related themes. At the same time, higher taxes on tobacco, petrol or diesel may dent select counters.
The government’s fiscal deficit target and borrowing plans will be monitored by bond markets. Any deviation from expected targets could lead to gyrations. On the other hand, status quo may bring relief. The budget could also provide more clarity around privatization agenda and divestment target for the year.
The rupee is also likely to track cues from the budget and global factors in deciding its near term bias. A relief rally hinges on announcements being in-line or better than market expectations. Meanwhile, dollar demand from importers is an overhead risk. Overall, it will be intriguing to see how markets interpret the budget in regards to the economic outlook ahead.
