Union Budget 2024: How stock markets are likely to react before and after Budget

The Union Budget 2024 is set to be presented on July 23 this year. During the interim Budget presentation on February 1, Finance Minister Nirmala Sitharaman emphasized on ‘Viksit Bharat by 2047’- a detailed roadmap of which is expected to be unveiled in the full budget. As per brokerage firm Morgan Stanley, the finance minister is likely to 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.

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As per the brokerage firm, the stock market falls on two of three occasions in the 30 days post the budget. Probability of a fall rises to 80% if the market has risen in the 30 days preceding the budget, the analysis showed. The Indian stock market has been up both pre and post the budget only twice in 30 years.

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As per Morgan Stanley, Indian stock market investors should focus on three things:

1. Fiscal consolidation: Any deviation from the fiscal deficit target can influence the stock market, as per Morgan Stanley which noted that a contraction in the fiscal deficit below 5% may not make the stock market happy.
2. Infrastructure: More spending on physical and social infrastructure can also impact the stock market. If government spends more on rural and infrastructure spending, consumer discretionary and industrial stocks will likely fare better and the brokerage said that it remains overweight on all three sectors. Read more: Amazon India staff on working conditions: Made to stand for hours, restroom breaks not allowed
3. Sector wise investment: The stock market could be surprised by the lack of major tax cuts or redistribution spends owing to which specific sectoral incentives and spending will be crucial. Among sectors, Morgan Stanley remains overweight on Financials, Consumer Discretionary, Industrials and Technology.

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