5 takeaways from the Interim Budget 2024 for investors

Individual themes are expected to exhibit strong performance, benefiting from certain Budget announcements

Finance Minister Niramala Sitharaman on February 1 presented the government's last Budget ahead of the General Elections in May this year. Since it is an election year, this was a vote on account budget, hence, no major announcements were made.

However, investors anticipated reforms to boost market confidence, such as measures to increase foreign direct investment (FDI), steps to simplify the process for Initial Public Offerings (IPOs), and clarity on the Securities Transaction Tax (STT) and the Long-Term Capital Gains (LTCG) tax.

On this FM said, "I do not propose to make any changes to taxation – direct, indirect, or customs duties."

Five takeaways for investors from Budget 2024

1) Fiscal deficit at 5.1 percent and net borrowing of Rs 11.75 lakh crore for FY25 came in better than street expectations which is likely to be positive for bond markets

2) Capital spending growth pegged at 12 percent, largely came in line with expectations. This should support growth till private capex comes on stream full force.

3) The Budget's main focus was on key infrastructure segments including railways, metros, power, capital goods. They will stay supported by government spends

4) No change was announced in long-term/short-term capital gains tax, direct or indirect taxes, meaning post-tax return economics stands unchanged across asset classes for local investors.

5) Overall, the Interim Budget was positive for markets. It should attract foreign investors, when global liquidity flows back into to EMs including India.

Markets ahead of Budget

In the run-up to the event, markets witnessed high volatility with Nifty swinging between up and down days over the last two weeks. The pattern made it challenging for traders to establish a clear directional trade. With anticipated heightened volatility, analysts advised traders to stay vigilant.

Individual themes are expected to exhibit strong performance, benefiting from certain Budget announcements. Investors must focus on such themes to identify outperforming opportunities, said experts.

Nifty entered January on a high note. The index hit an all-time high of 22,124.15 in the second week. However, as Union Budget 2024 neared, investors became cautious, and India VIX spiked to a 9-month high of over 16. Selling was seen, taking Nifty below 22,000. The index ended the month marginally lower.

Markets on Budget Day

Benchmark indices Nifty, Sensex shrugged off the day's gains to trade flat as FM missed major surprise in the Budget.  At 12:28 pm, the Sensex was up 20.53 points or 0.03 percent at 71,772, and the Nifty was trading flat at 21,726.

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