Budget 2024: No huge expectations of long-term market impact, says Pradeep Gupta of Anand Rathi group

Interim Budget 2024: Pradeep Gupta, Co-founder & Vice-chairman, Anand Rathi Group in an interaction with Mint talks about his budget expectations, sector and stocks that remain in focus,  approach towards the markets. Gupta says that although it is an interim budget, it will be of significance as it reiterates the focus areas of the government on returning to power. However there are no huge expectations of long term market impact. Edited excerpts

1. What are the expectations from the Budget 2024?

Although this is an interim budget and the full budget of FY25 will be presented only after the new regime forms government post general elections 2024, this will be of significance as it reiterates the focus areas of the government on returning to power.

Fiscal State: The fiscal glide path has been set at deficit of 4.5% by FY 26. The government had projected fiscal deficit target of 5.9% of GDP for FY 24. With the nominal GDP expected lower as per the first advance estimates for FY24 than the initial budget projections, the government is expected to tweak some expenditure in its revised estimates for FY 24. The capex is likely to be lower than the budgeted estimates as few of the States have not yet fully utilized the capex loans granted by the Centre in the first instalment. Also the buoyant tax revenues shall support the fiscal math. The fiscal deficit target for FY25 could be set at 5.3% of GDP.

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Capex is expected to remain upbeat for FY 25. The interim budget is expected to continue its weight on capex. As India appears to be in the most advantageous position to take benefit of China +1 opportunity that the corporates are intending, India is expected to improve the infra status in the country and thus attract investments.

As private sector capex is yet to pick up in full swing the government support in short term is expected to continue.

Income tax reliefs and deductions-  Since Income tax and the revenue collection growth remain strong owing to the robust economic performance and also higher collections of GST, the government may find space to increase the tax slab levels.

The new tax regime is viewed as disincentivising savings as those deductions on investments available in old tax regime do not apply to those opted the new tax regime. In order to incentivise savings and also making the new tax regime attractive certain savings and payments can be allowed towards deductions.

2. What is the expected Impact on the markets?

Markets are driven by sentiments and as per previous data it has been observed that there is increased levels of volatility prior to the budget, however as stated earlier, since it being an interim budget, there isn’t a very huge expectations of long term market impact.

3. What should be the investors strategy before the budgets? 

Investors looking at long term investment horizon can use the volatility to increase allocations or rebalance their portfolio wherever necessary, a broader level tactical call can be taken on the short term portfolio as well.

4. Which are the sectors or stocks that may remain in focus ahead of budget?

Manufacturing boost- Budget to focus on self reliance in most of the critical sectors. PLI schemes had been rolled out for different sectors to give boost to manufacturing. India has emerged as the second largest manufacturer of mobile phone devices and a potential semiconductor hub. This is expected to continue.

Ease of FDI-  With FDI in most of the sectors being allowed under automatic routes, we may expect easing in some if the regulatory requirements to boot investment. India is expecting USD 100 billion FDI in coming years despite recent slowdown.

Defence- Self-reliance in defence equipment manufacturing has received major boost over the years. Defence production crossed 1 lakh crore for the first time and exports were 16000 crores covering 85 countries in the last year. The sector is expected to receive further boost for indigenous production.

Infrastructure- Launch of National Infrastructure Pipeline and the PM Gati Shakti Yojana involving investment’s over 150 lakh crores have received budgetary support with the Central government being the major investment driver. Roads, railways and warehousing, logistics and green energy to been the key focus areas.

Also Read- Budget 2024: No profound impact on market; global cues to dictate trends, says Vinod Nair of Geojit Financial Services

5. What are the other factors influencing the markets in the near term? any stock or sectoral picks

The consensus anticipates a continuation of softer inflation, a gradual but early cuts in monetary policy rates in the major industrialised countries, and the absence of at least an annual recession in both the US and Euro area. A number of these may not materialise in practise. Rapid monetary tightening initiated in 2022 may have a significantly greater adverse effect on growth than is presently estimated. As a result of the inflationary surge that occurred in 2022, the major central banks might be considerably more reticent about reducing interest rates during the current cycle. Recessions in the euro area and the United States continue to be distinct possibilities. These setbacks, in conjunction with the current overvalued state of the US equity market, indicate that a significant market correction in the United States is probable in 2024. Historically, Indian equity markets outperformed their counterparts across all medium to long-term investment time periods.

One of the key risks that we are looking at is exposure to significant global risks, such as recession in developed nations, a more gradual relaxation of monetary policy rates than anticipated, and the potential for corrections in the US equity market. Moreover, the Indian equity market is confronted with substantial risks due to excessive fiscal deficits and public debt levels in the United States, higher-than-anticipated unemployment rates in developed nations, ongoing geopolitical uncertainties, and US elections. Key risk factors for the Indian equity market on the domestic front include a deceleration in corporate investment and populist declarations by political parties in anticipation of the upcoming general elections, as well as a deceleration in private consumption as indicated by recently released GDP data.

The sustained substantial inflows into the Indian equity market, particularly from domestic investors, and the public's interest in primary equity capital raises (especially IPOs) by companies appear to indicate that investors maintain a positive outlook regarding the Indian equity markets.

India maintains the highest macroeconomic performance among its peers and continues to be one of the most captivating nations in the emerging market space. The majority of sectors of the Indian economy, such as banking, government finance, industry, and infrastructure, continue to operate efficiently. Despite concerns regarding a deceleration in consumer demand and a lackluster demand for India's exports of goods, we anticipate India's GDP to expand by approximately 6.5% in the current and following fiscal years, we expect Indian equities to maintain the upward journey in the near term and are positive on the long term on the backs of strong fundamental factors.

6. FPI have been sellers? what has turned FPI into being sellers? Should we expect their return

The FPI’s turned net sellers in the month of January’2024 to the tune of Rs.16,601crs, mainly on the assumptions of the possibilities of Indian regulators having more stringent disclosure and capping being levied. We believe that once there is absolute clarity on the matter there is a possibility of them returning back to the Indian Equities.

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 taking any investment decisions