Budget 2024: Markets indifferent but welcome aggressive fiscal deficit target

If the equity benchmark indices are anything to go by, then it wouldn’t be wrong to say that the stock market has been very indifferent to the interim budget presented today by Finance Minister Nirmala Sitharaman.

The benchmark Sensex, which was trading up around 285 points at 72,035 when the finance minister rose to present the interim budget at 11am, had given up most of the day’s gains to hover around 71,815 -- up around 63 points – when the speech concluded around 12 noon.

Similarly, the broader Nifty of the National Stock Exchange fell from around 21,800 level to 21,731 in the one-hour period of the budget speech.

However, the movement of the benchmark indices clearly corroborated the fact that the markets were not expecting any big-bang announcements or any populist measures given it was just an interim budget.

Meanwhile, market participants believe that the government played it safe and, more importantly, the absence of any negative shock ensured that there were no huge swings in the first half of the trading session.

“The absence of significant market fluctuations indicated that the budget did not introduce radical economic shifts,” said Kresha Gupta, Founder, Chanakya Opportunities Fund.

“In an announcement that delivered on subdued expectations, India's FY 2024 Interim Budget unfolded with no major surprises, reflecting a pragmatic approach to fiscal policies,” she added.

Interestingly, while there were no changes in the tax structure, extension of certain exemptions was looked upon as a positive.

“With no significant changes in the direct tax regime and the extension of current tax concessions for start-ups and international investors should help provide assurance and stability for markets and taxpayers,” said Vishal Kapoor, CEO, Bandhan AMC.

The biggest positive, however, was the fiscal deficit target of the government and a lower-than-expected number was a positive surprise.

“The government has stuck to the path of fiscal prudence and it was a welcome surprise to see fiscal deficit revised estimates to be at 5.8% and a glide path towards 5.1% and 4.5% over the next two years,” said Aniruddha Naha, CIO – Alternates, PGIM India Asset Management.

In a similar context, Amar Ambani, Executive Director, YES Securities said that while the finance minister presented a “largely non-populist” budget, she “largely traversed on a sustained development trajectory” with the fiscal deficit target being the biggest plus.

“Clearly, the biggest plus for the market was the aggressive fiscal deficit target of 5.1% for FY25 versus expectation of 5.5%... The commitment to achieve a 4.6% fiscal deficit in FY26 seemed imperative, given the inclusion of Indian bonds in global indices,” said Ambani.

Incidentally, the benchmark indices were trading slightly in the red during the late afternoon session.

Also read: Budget 2024 live: FM's speech at 11 am, taxpayers, investors wait with bated breath

 

Also read: Interim Budget 2024: Housing for middle-class scheme to strengthen financing, cement, steel, paint sectors