This is perhaps one of the most anticipated Budget in recent times. Slowdown concerns, inflation worries and global uncertainty has been impacting sentiment across D-Street. The Econiomic Survey, no doubt gave a filip to sentiment in terms of the push to drive growth and revive consumption. The question is can Finance Minister Nirmala Sitharaman Deliver?
What’s stock market expecting from Budget?
The key expectation for the markets include-
Tax relief for lower-income groups
Increasingly there is call for tax tweaks to enable more money coming into the common man’s pocket. The market is keen that this year it is particularly important that the Finance Minister avoids introducing new taxes on investors. Instead, they ae expecting meaningful tax rebates to enhance consumer spending power could help revive the consumption cycle. Shripal Shah, MD&CEO, Kotak Securities expects that the, “government is likely to take decisive steps in the upcoming budget to kick-start the economy, especially in light of the recent GDP slowdown. Tax relief for lower-income groups can help revive consumer spending, putting more money in the hands of the common man and boosting demand.”
Boosting Consumption
Quite unlike expectation, the festive sales had failed to revive the demand sentiment. Overall, demand has been on the lower side and the expectation is that the Government will focus on boosting consumption. Vinod Nair, Head of Research, Geojit Financial Services added that, “The indices are fueled with expectations of a pro-growth budget and prudent fiscal as indicated in the economic survey. Positive global cues and better-than-expected results from major companies are also contributed to the upward trend. Market expects reductions in individual tax and job generation to boost consumption. By cutting fiscal deficit but continuing to boost infrastructure spending, the government may set the tone for a potential recovery in the consolidating market.”
Boost infra spend
The capex spend has been an area of concern. Given the elections in 2024, capex had taken a backseat and the expectation is that there will be significant push towards getting a leg-up for capex spend. In terms of allocation, the FY25 Budget had about 11.1 lakh crore for capex allocation for the Budget. However, given the pace of capex growth, the capex development may see a 10-12% miss from target.
Tweak in capital gains tax
The Finance Minister Nirmala Sitharaman had introduced key changes to the overall Long-Term Capital Gains (LTCG) tax structure in the interim Budget and tax rates were raised to 12.5% from 10%. The LTCG tax now applies to gains exceeding Rs. 1.25 lakh from the sale of listed shares and equity mutual funds. There are expectations that there will be some tweak to revive investor sentiment. “Additionally, to address continued outflows by FIIs and strengthen market sentiment, the budget should introduce reforms in the capital markets, such as a review of capital gains tax or Securities Transaction Tax (STT). A well-balanced approach addressing both consumption and investment will be crucial in driving economic recovery and market stability,” added Shripal Shah.