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As we step into the new year all eyes are on the interim budget and understanding its impact on the stock market is crucial. Let’s simplify this ever relevant topic with a special focus on this year’s interim budget.
Key Allocations
Distribution of government funds plays a crucial role in influencing different outcomes. In this year’s interim budget, anticipate the allocation of funds towards crucial government operations, ongoing projects and urgent needs. A rise in spending typically indicates increased employment and consumption, bringing positive implications for the market.
Subsidies
Subsidies, especially in food and fertilizers are crucial for the rural economy.In the current fiscal year’s budget, approximately one-ninth of India’s total budget expenditure, amounting to ₹45 trillion in FY24, is allocated towards subsidies for food and fertilizers. Modifications in this figure can affect fertilizer companies and rural consumption, influencing sectors such as FMCG and two-wheelers.
Taxes
Changes in taxes including both direct taxes like Income Tax and indirect ones like Customs duties can impact the stock market. Increasing taxes can be beneficial for the government, but it could also hinder consumer spending. Traders keep a close eye on any changes in taxes and shifts in market sentiment. Changes in duties play a crucial role in affecting the prices of goods, shaping the financial landscape for businesses.
Setting Goals
Government sets objectives for parameters like fiscal deficit and GDP growth as part of the budgetary process. For investors, these targets serve as markers offering indications about future developments. Higher GDP targets show confidence in the economy and business potentially making the markets optimistic.
Divestment Plan
Government’s plans to sell or reduce its share in certain companies are like a roadmap for investors. This year, the focus could be on selling Shipping Corporation of India and Concor and privatizing IDBI Bank. Investors closely watch these moves understanding their potential to shake up the market.
As we go through this year’s interim budget relationship between government decisions and the stock market becomes more interesting. To get straightforward insights into the Union Budget 2024, keep yourself updated with Trade Target.
But, it’s typical for the markets to be a bit unpredictable around the Budget period. On Budget Day we’ve seen the markets get shaky with both ups and downs. So, rather than diving straight into the market on February 1st, investors and traders should take the opportunity to learn from the market’s behavior.
