Budget 2024: What should be your trading strategy ahead of FM’s announcement?

After the Lok Sabha elections, all investors are now eagerly waiting for the announcement of the full budget, which is likely to be presented in the third week of July.

Meanwhile, the finance minister conducted pre-Budget consultations with leading experts from the financial and capital markets sector in New Delhi, in preparation for the forthcoming Union Budget 2024-25. On June 20, 2024, she also held meetings with industry stakeholders and prominent economists, according to media reports.

Experts believes that the Indian stock market has maintained a positive tone so far post elections, gradually inching higher every week.

“The Indian market initially continued its upward trend as concerns over election outcomes eased and global sentiment improved. With a coalition government in place, there is optimism that the upcoming budget will strike a balance between growth initiatives and populist measures. Additionally, expectations are high for government actions aimed at stimulating consumption, a critical area to focus on,” said Vinod Nair, Head of Research, Geojit Financial Services.

Market performance ahead of Full Budget 2024

According to Prashanth Tapse, Sr VP Research analyst at Mehta equities ltd, market volatility may rise ahead of the new full year Budget 2024.

“We anticipate the government won’t do anything to derail the growth and the speed of the economy with a clear focus on capital expenditure towards taking the economy to $5 trillion. As the first budget of this new government term Modi 3.0 would be highly watched with lots of expectations of tax reliefs from all sectors and boost the economy,” Tapse said.

The Final Budget 2024 is also likely to focus on several critical areas with key expectations including fiscal measures to drive economic growth and increased infrastructure spending. Incentives to boost domestic manufacturing in strategic sectors are also likely.

“In the lead-up to the Union Budget, there has been noticeable traction in agriculture-related themes such as fertilizers, sugar, agrochemicals, and defense. Additionally, there's renewed interest in banking and strong indications of a trend reversal in IT. Given the overall scenario, we suggest maintaining a positive market outlook and aligning positions with the aforementioned sectors and themes,” said Ajit Mishra - SVP, Research, Religare Broking Ltd.

Market expectations from the July Budget 2024

Prashant Tapse of Mehta Equities suggests traders and investors should focus on sectors like Infrastructure, Defence, Railways, Energy (Especially renewable sector), Agriculture, EV and boosting MSME sector.

“From a stock market prospective we are not expecting any change in the increasing Securities Transaction Tax or any other related taxes as the government has a clear focus to develop capital markets with an aim to see India touching a $5 trillion economy,” he added.

The budget will focus on reforms aimed at attracting foreign investment, simplifying the tax regime, and prioritizing green energy and sustainability, according to Ajit Mishra of Religare Broking.

“Additionally, participants will also be eyeing initiatives aimed at strengthening the rural economy, job creation and support to the MSME sector,” Mishra added.