Explore the potential impact of Budget 2024, FM Sitharaman’s fiscal roadmap for FY25. Markets anticipate capex push and tax relief, while wary of unwelcomed measures. Dive into the dynamics shaping economic growth and market sentiment.
In the intricate world of stock markets, anticipation builds as Finance Minister Nirmala Sitharaman prepares to present the Vote-on-Account in Parliament. Analysts, investors, and the general public eagerly await insights into the government’s economic roadmap. Let’s delve into what the stock markets want to hear and, conversely, what they hope to avoid.
The Anticipated List
1. Continued Capex Push Going into FY25
Amidst concerns about the private sector’s tepid investment in capacity expansion, eyes turn to the government for economic stimulus. A robust government spending initiative in infrastructure can propel growth across sectors like capital goods, engineering, steel, and cement. The ripple effect could generate employment, fostering increased consumption and subsequently boosting stock prices for the benefiting companies.
Probability: The market remains uncertain about an aggressive capex push due to the government’s commitment to a fiscal deficit target of 5.4% in FY25. Striking a balance between economic stimulus and fiscal prudence poses a challenge.
2. Higher Threshold for Personal Income Tax, Rebates
With inflation eroding disposable income and dampening consumption, expectations lean towards tax relief measures. A higher threshold for personal income tax and increased rebates could inject liquidity into the hands of the middle-class, uplifting sentiment and spurring discretionary spending—an appealing prospect, especially in the run-up to elections.
Probability: Recent state poll results suggest the government might not feel immediate pressure to court the middle class. However, historical precedents indicate that such measures are not entirely ruled out.
3. Increased Allocation to Rural Schemes
The rural economy, still grappling with the aftermath of the COVID slowdown, seeks attention. Weak sales in two-wheelers, consumer durables, and fast-moving consumer goods indicate a need for revitalization. Increased allocation to rural schemes is anticipated to stimulate economic growth and cater to a broader consumer base, crucial with elections on the horizon.
Probability: This expectation seems likely to materialize as sustainable economic growth necessitates participation from all consumer segments, coupled with the impending elections.
Unwelcomed Possibilities
4. Increase in Securities Transaction Tax
Market players express disapproval at the prospect of an increase in the securities transaction tax. Such a move could dent the margins of day-traders, disrupt liquidity, and dampen overall market sentiment.
Probability: Unlikely, as the government is unlikely to risk alienating the stock market constituency for marginal benefits.
5. Hike in Long-Term Capital Gains Tax
Market participants remain wary of any adjustments to long-term capital gains tax, as historical sell-offs have followed such changes.
Probability: Not an immediate concern, but the general expectation lingers for the July Budget.
Conclusion
As the Finance Minister unveils the fiscal roadmap, the markets keenly await signals of economic revival and stability. The delicate balance between stimulating growth and managing fiscal constraints will be closely scrutinized. While expectations run high for positive announcements, there is an equal wariness of unfavorable measures that could disrupt market dynamics.