Market Reactions: Analyzing Post Union Budget 2024

Union Finance Minister Nirmala Sitharaman took center stage on July 23, 2024, as she presented the Union Budget for 2024-25, marking her seventh consecutive Budget presentation.

The stock market's reaction was heavily influenced by the Budget proposals across various sectors. Earlier in the day, the Indian stock market erased its initial gains due to caution ahead of the Budget announcement. Although the NSE Nifty 50 and S&P, BSE Sensex opened about 0.3% higher, they were trading flat at 24,516.65 points and 80,553.96 points, respectively, by 9:40 am.

Key Highlights and Fiscal Policies Post Budget 2024

The Budget effectively balances welfare spending, capital expenditure, and fiscal discipline, with substantial allocations for women, MSMEs, and agriculture. While maintaining a fiscal deficit of 4.9% is noteworthy, the hike in capital gains and securities transaction taxes negatively impacted market sentiment.

Post Budget 2024 Highlights:

•    Increase in Taxes on Capital Market Gains: The proposal includes higher taxes on capital market gains.

•    Security Transactions Tax (STT): To reduce speculative trading, the FM proposed doubling the STT to 0.02% and 0.1% for equity and index trades, respectively.

•    Short-Term Gains Tax: Short-term gains on specific financial assets will now be taxed at 20%.

•    Long-Term Gains Tax: Long-term gains on all assets will be taxed at 12.5%.

•    Capital Gains Exemption: The exemption for lower and middle-income classes has been raised to ₹1.25 lakh per year.

•    Market Reaction: The market initially dropped due to the LTCG tax hike but partially recovered by 1:10 pm IST, with the Sensex and Nifty 50 down only half a percent.

•    Expert Opinions: Analysts believe the tax increase is modest and won't significantly impact market sentiment.

•    Fiscal Deficit: The fiscal deficit for FY 2024-25 is set at 4.9% of GDP, with plans to reduce it to below 4.5% by FY 2025-26.

•    Fiscal Discipline: The Budget emphasizes enhancing fiscal discipline and managing expenditures effectively to boost economic stability and growth.

Sector-wise Market Performance and Impact Analysis Post Budget

The Budget 2024 aims to make India “Atma Nirbhar” (self-reliant). Investors and traders can focus on these sectors as the substantial fund allocations are likely to drive share prices up.

Agriculture

The Budget allocates ₹1.52 lakh crore to the agricultural sector to enhance productivity and resilience. Investors can profit by investing in companies involved in producing oil seeds, mustard, soybeans, shrimp, and green vegetables. The allocation also opens opportunities for domain experts in both private and public sectors. 

Read Agri Stocks Surge as Budget 2024 Announces ₹1.52 Lakh Crore in Reforms

Infrastructure

The government has emphasized infrastructure development, promising additional support for capital investment. Special attention to connectivity and tourism infrastructure is expected to boost related stocks. Notably, plans to create 2400 MW power plants indicate positive growth in this sector post-Budget.

Manufacturing and MSMEs

Manufacturing and MSMEs are among the top priorities, with a focus on financing and technological advancements. The establishment of a separate guarantee fund providing ₹100 crore will support credit demand and asset quality for lenders, benefiting the MSME sector.

Skilling and Employment

Three major employment-linked incentive schemes and an allocation of ₹2 lakh crore for upskilling 4.1 crore youth are expected to benefit companies involved in skill development.

Pharma and Healthcare

The Pharma and Healthcare sectors received a 12% increase in fund allocation and attractive tax exemptions, drawing investor interest post-Budget.

Long-term Vision and Strategic Goals

The Budget 2024 places a continued focus on record capital expenditure, especially in infrastructure. Guided by the vision of 'Viksit Bharat 2047,' this ambitious Budget aims to steer the country’s economic and infrastructural strategies over the coming decades. By aligning budgetary priorities with this vision, the government aims to lay a robust foundation for sustainable growth and development, focusing on key areas such as infrastructure, innovation, and fiscal responsibility to achieve the goal of a developed India by 2047.

Also Read Union Budget 2024: Travel and FMCG Stocks Rise in Bid to Boost Tourism and Employment