Budget 2024: What stock market analysts, fund managers, economists say on budget announcements

Stock market indices namely Sensex and Nifty were trading flattish, erasing their entire morning gains that were built ahead of the Budget. The Finance Minister Nirmala Sitharaman walked on the path of fiscal prudence and ensured her government's infrastructure push stayed strong. She decided not to tinker with either direct or indirect taxes, and suggested a divestment target of Rs 50,000 crore for FY25, which was much in line with Street estimates. Here's what analysts, fund managers and economists say on the Budget announcements:

Sonal Varma, Managing Director, Chief Economist - India and Asia ex-Japan, Nomura*.

Varma said the budget delivered a positive surprise. This was not a pre-election budget, she said. While the budget speech talked a lot about the key voter constituents, it has chosen to prioritise fiscal consolidation, Varma said. This bodes well for macro stability and will be seen as positive by the RBI as well, she said.

"Much better than expected fiscal deficit targets. FY24 bettered at 5.8 per cent of GDP vs budget target of 5.9%. FY25 set at 5.1% of GDP, much better than expected (5.2-5.4 per cent of GDP), and signaling the intent to get to the medium term fiscal deficit target of 4.5 per cent of GDP in FY26. The pace of increase in capex will slow slightly in FY25, but that was expected," Varma said.

Varma said the capex would rise 16.9 per cent YoY  in FY25 against 28.4 per cent in FY24, which still shifts up capex-to-GDP ratio to 3.4 per cent in FY25 from 3.2 per cent in FY24.

"Over the last 2-3 years, private capex was weak, so public capex stepped in. Now with private capex likely to pick up, the government is slowly stepping back to prevent crowding out," Varma said, adding that borrowings are much lower than expected. 

Amar Ambani, Executive Director, YES Securities

Ambani said the FM largely traversed on a sustained development trajectory. The policy intent, he said, was crystal clear as seen through the selective allocation of resources, with stronger emphasis on sectors of rural and middle-class housing and Green Energy.

"Clearly, the biggest plus for the market was the aggressive fiscal deficit target of 5.1 per cent for FY25 versus expectation of 5.5 per cent. Our own view was closer to the government stance, that it will target an aggressive number for FY25. The commitment to achieve a 4.6 per cent fiscal deficit in FY26 seemed imperative, given the inclusion of Indian bonds in global indices," Ambani said. 

The improving fiscal deficit scenario is largely based on the government's expectation of continued tax buoyancy, higher dividend from PSUs and RBI, and much tighter control on central expenditure, Ambani said.

"Consequently, market borrowing in FY25 is projected lower than FY24 levels, in what’s a huge positive for the private sector borrowing and bond market yields. We fancy RBI soon changing its stance on monetary policy from the “Withdrawal of Accommodation” to “Neutral”. Other standout features include the incremental target of two crore affordable homes under the PM Awaas Yojana Gramin in next five years, with three and a half crore homes already nearing completion," he said.

The government infra push continues unabated, albeit at a slower pace versus market expectation, Ambani said.

"Our view again here was that the government spending growth of 12% is reasonable, as the private sector capex would gather momentum. Further, granting sustained interest free loans to states and urging them to spend on capex will have a bigger multiplier effect on growth. Notably enough, the budget was strong on rail infra within overall infra. The missed announcement was around manufacturing and PLI. While we saw some subsidy hike, no material sops were announced," he said. 

Trideep Bhattacharya, President & Chief Investment Officer- Equities, Edelweiss MF

In an election year, said Bhattacharya, the budget adeptly striked a balance, prioritising sensibility over populism. It showcases India's unwavering commitment to infrastructure development, coupled with a steadfast adherence to fiscal prudence, Bhattacharya said.

"This paves the way for sustained growth, steering the nation along the trajectory towards achieving a developed economy by 2047," he said.

Pradeep Gupta, Co-founder & Vice-chairman, Anand Rathi Group

Infrastructure Investment: The Finance Minister announced a modest 11.1 per cent increase in India's infrastructure spending, aligning closely with the nominal growth estimate. However, to address the challenges of deteriorating infrastructure, India must consider a more substantial increase in investment rather than a reduction. 

"The FM has continued to focus on strengthening of domestic macro factors including sustained investments in Infra, Agriculture, Domestic Tourism, and also sticking to fiscal responsibility with a lower fiscal deficit which could be music to the ears of foreign investors and impending $25 billion bond inclusion in June as lower budget deficits and pared borrowings will help bring down yields. It could possibly open the door for a ratings upgrade," Gupta said.

For Gupta, the key features of the budget was the FM's focus on infrastructure, tourism, logistics and innovation in research. All these measures will bring continuous sustainable growth of the economy, he said. 

"This shows the continued commitment of the existing government to move towards bringing fiscal prudence and reaching to the targeted fiscal deficit of 4.5 per cent of GDP by FY26," he said.

Chirag Mehta, CIO, Quantum AMC

Mehta said there was an expectation that given it’s an election year, the budget could tilt more populist with more support for rural sector. But contrary to expectations, the government continues to be driven by development and fiscal prudence as the central focus.  Given the economic growth momentum , there was need for assuring macroeconomic stability which has been judiciously crafted to give way for fiscal consolidation.

"The lower tax collection assumption could either be conservative or government signal to assume some growth moderation going forward. The government continues it capital expenditure spending with on Inclusive development with Agri, Infra (including housing) and Green ecosystem as the key thrust areas with an emphasis on Research and Technological developments. There was a need to support manufacturing momentum and way to revive rural economy. However, probably that could be part of the main budget that gets presented in July as government plans to showcase a pathway for Developed India,” he said.Ashish Gupta, CIO, Axis AMC

While Gupta did not expect any major announcements in this budget, the lower fiscal deficit coupled with higher capex outlay, he said will aid continued momentum of India growth story. Both of these moves are enablers for a pickup in private capex cycle, Gupta of Axis AMC added.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Vijayakumar said the hallmark of this interim Budget was its fiscal rectitude. The fact that the government has prioritised fiscal consolidation over populism on the eve of general elections is commendable, he said.

"The fiscal deficit numbers of 5.8 per ecnt in the revised estimates for FY24 and 5.1 per cent for FY25 are better than the most optimistic expectations. This is very good news for the economy and consequently for the market. The boost to housing is another important proposal from the market perspective since this will benefit industries like cement, steel and all construction related segments," he said.

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

Also, growth in tax assumptions are below 12 per cent, which is conservative and gives the government reasonable elbow room to continue its investment oriented growth plans, Naha said.

Anitha Rangan, Economist, Equirus

Ragan said with a new definition to GDP (Governance, Development and Performance), with a sharp focus on fiscal consolidation, the interim budget has demonstrated that the direction of the government is on long term growth. Fiscal deficit target demonstrates the government’s commitment to not go the populist way, she said.

"But at the same time, focus on the four pillars of social governance viz. poor, women, youth and farmers, government’s direction in Amrit Kaal is towards an inclusive growth with is sustainable and non-inflationary. Capex growth estimated at 11.1 per cent is reasonable. Market borrowing is lower for FY25 versus FY24. In the era where the global world is struggling to rein in fiscal deficit and borrowing, India adopting the path of consolidation and reduction in borrowing showcases its macro stability," she said. 

Sanjay Moorjani, Research Analyst at SAMCO Securities:
 
The Finance Minister announced that the Centre is close to achieving its target of 3 crore houses in rural areas despite the impact of the Covid-19 pandemic. Additionally, the government has set a new target to build 2 crore more houses in the next five years under the Pradhan Mantri Aawas Yojana (PMAY Grameen). Moorjani said the significant announcement is poised to impact stocks in the steel, cement and power sectors positively, especially with the augmented budget allocation.

Manish Gunwani, Head – Equity, Bandhan AMC on the Interim Budget.
 
Gunwani said it was a fiscally prudent budget with conservative assumptions on tax revenues, nominal GDP etc. A big positive is the potential for interest rates to go down given the higher-than-expected drop in fiscal deficit, he said.

"Overall we believe it enhances the macro stability of the economy," Gunwani added.

 

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