The Union Budget has consistently been a key driver of trends in the Indian market. The upcoming Union Budget for the financial year 2024-25 is anticipated to prioritise capital expenditure (capex), emphasise on manufacturing growth, and ensure macroeconomic stability. Traditionally, Union Budget announcements wield significant influence over the stock market, shaping trends in various sectors based on government policies and financial plans.
The Interim Union Budget for the financial year 2024-25 is going to be presented in the Parliament by Finance Minister Nirmala Sitharaman on February 1, 2024, at 11 am. FM Sitharaman has already hinted that there will be no spectacular announcement, which means there will be no big changes to the budget in 2024. This vote-on-account budget serves as a temporary placeholder until the new government takes office after the upcoming elections.
Here's how you should prepare your portfolio for the upcoming Interim Union Budget.
To prepare your portfolio for the 2024 budget, it’s important to understand budget implications. One needs to analyse the government's recent focus areas and upcoming initiatives. It is also important to monitor the market's reaction to the budget announcement and subsequent policy changes. Stay alert and well-informed, and adjust your portfolio as needed based on new information.
Trivesh D, COO, Tradejini, believes that while major policy changes are unlikely, some experts anticipate small tweaks, such as simpler classifications for income from stock market transactions and adjustments to equity deductions within the new tax regime. The focus will be on sectors like infrastructure, healthcare, education, renewable energy, and so on. These sectors might receive increased allocations and tax benefits, potentially boosting related stocks, he added.
He advises investors to invest in fundamentally strong companies; that’s the right way.
"Regardless of budget-related considerations, prioritize investing in companies with strong fundamentals, sound management, and a long-term perspective. Don't make drastic portfolio changes solely based on short-term budget-related expectations. As an investor, you must have a diversified portfolio in sectors, market capitalizations, and investment styles. Consider diversifying further to minimize risks from budget-related uncertainties. Always, evaluate your exposure to sectors that are likely to be affected by the budget. Consider rebalancing your portfolio to adjust weights in anticipation of potential gains or losses. And of course, consult with a qualified financial advisor to discuss your specific investment situation for personalized guidance on preparing your portfolio for the budget," suggested the expert.
He further noted that the budget for 2024 might not make stocks jump right away, but it can hint at which parts of the economy will do well in the future. Investors must use this idea to adjust their portfolios, investing in areas the budget seems to favor. Think of it like planting seeds and waiting for them to grow, not a sudden burst of fireworks, added the expert.
Anshul Arzare, MD and CEO, Yes Securities, stated that the market’s direction hinges on the budget's influence. One needs to identify the sectors and themes likely to receive favor from the budget and update the sector allocation of one's portfolio accordingly.
"Continuing with Capex is expected to remain a key focus in the upcoming budget. India's aspiration to rank among the largest global economies necessitates sustained capex from both private institutions and the government. The government seems to be placing significant emphasis on sectors such as railways, road infrastructure, bridges, manufacturing, banking, defense, etc. The government is actively fostering the expansion of India's manufacturing sector, emphasizing the ‘Make in India’ initiative and incentivizing global companies to relocate their manufacturing operations to the country. With strategies like China+1, intensified trade discussions, the PLI scheme, and India's advantageous demographics, the manufacturing sector is poised for substantial growth. It's expected that the upcoming budget will further support and encourage this expansion," believes Arzare.
Pranav Haridasan, MD and CEO, Axis Securities, also expects the interim Budget to retain the growth roadmap and reaffirm the government's commitment to long-term growth, with a continued focus on infrastructure development. There may be an increased emphasis on power, utilities, and renewables. Railways, infrastructure, and capital goods companies are poised to remain in the spotlight with higher capex spending. Automobiles and FMCG are likely to get a boost from higher rural spending, Haridasan added.
Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS, also noted that the upcoming Vote on Account—Interim Budget 2024 is a pivotal event for investors.
"Support for critical sectors like infrastructure, agriculture, and healthcare is anticipated. During the Interim Budget, sectors likely to be in focus include infrastructure, agriculture, banking and finance, and renewable energy. Infrastructure-related companies, particularly in construction, cement, and steel, could benefit from increased government spending. Agriculture initiatives might uplift related companies, while public sector banks could gain from government projects. The focus on green energy could also benefit renewable energy companies, aligning with global environmental goals," she suggested.
Anticipating the interim and full budget, Divam Sharma, Founder and Fund Manager at Green Portfolio, PMS, also foresees a sustained emphasis on growth and infrastructure. The impending general elections may prompt populist announcements, shaping a positive trajectory for sectors such as infrastructure, manufacturing, and FMCG. Hence, investors can increase weightage in these. The budgetary focus on these areas is expected to fuel momentum, aligning with broader economic objectives, added Sharma.
"Observing these trends closely will provide valuable insights into the government's strategic priorities and their potential impact on key sectors. We expect the growth and infrastructure focus to continue in the interim and full budget. We also expect some populist announcements considering the upcoming general elections. Infra, manufacturing, and FMCG could see positive momentum with the budget announcements," he recommended.
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 decision.
