After a brief underperformance last week, equity bulls on Dalal Street rejuvenated and this saw the BSE Sensex notching 1300 points of gains in a single session just three days prior to the Budget presentation.
While this is an interim budget for 2024-25 (April-March) ahead of the general elections, a sense of euphoria has prevailed in the market ever since Bharatiya Janata Party claimed victory in three out of the five state assembly elections last year.
Further, the prevailing domestic macroeconomic conditions has led to optimism that the capex-related investments by the government will continue without compromising on fiscal consolidation.
This optimism is not unfounded, as government spending in areas such as infrastructure and energy typically signals robust growth prospects, thereby attracting investor interest, says Sonam Srivastava, smallcase manager and founder of Wright Research.
“Additionally, specific sectors such as defence and railways are experiencing a surge, likely due to expectations of targeted fiscal stimulus. This sector-specific rally is a strong contributor to the overall index performance, as these sectors form a substantial part of the Nifty 50,” Srivastava said.
Most experts see the upcoming budget focussing on the fiscal roadmap, capital investment-led expansion, and also providing a roadmap to bolster rural growth.
“We expect the government to stick to its capex target of Rs 10 trillion in FY24 and raise it further by 10% to Rs 11 trillion in FY25…The government has been focussing on public infrastructure to drive capex growth,” Care Ratings said.
Given that tighter liquidity conditions and higher inflation affected the purchasing power of the masses, experts expect the budget to provide relief to those at the bottom of the pyramid.
“As the BJP has flagged its GYAN strategy in terms of focusing on the poor, youth, women and farmers, we do think allocations to these specific schemes will increase, but not at the cost of fiscal consolidation,” says Sonal Varma, managing director and chief economist (India and Asia ex-Japan), Nomura Financial.
A report titled “The Indian Economy: A Review,” issued by the finance ministry on Monday ahead of the interim budget said that India can aspire to be a $7-trillion economy by 2030.
And, many in Dalal Street are seeing this dream coming true.
“Prime Minister’s emphasis on steering India into a different “Kal Chakra” or orbit of economic development signifies a strategic shift. The notable growth of Uttar Pradesh, nearly 20% in the last year…serves as evidence that with the right focus, India too, can achieve high growth rates,” says Vikas Gupta, CEO and chief investment strategist at OmniScience Capital.
Can Market Momentum Last?
Ahead of the interim budget, Dalal Street has another crucial event and that’s the US Federal Reserve’s monetary policy review. The outcome of the two-day meeting will be announced on Wednesday night by the central bank.
While it’s widely expected that the Fed will leave policy rates unchanged at the end of the meeting, any clue on when the rate cut cycle will begin this year and whether the US economy will see a soft landing is what investors across the globe want to know.
Any positive cues from the policy and central bank officials can further drive the momentum in the market, according to experts.
On the home front, despite being an interim budget, the government is seen driving capex, especially in critical sectors such as infrastructure, logistics, defense, railways, power, and technology infrastructure.
An announcement under these lines will boost sentiment and give a further leg to the current rally in the market.
However, some experts foresee a phase of consolidation in the market in February and expect investors to wait on the sidelines for a clear trajectory.
“Considering the overall positioning and sentiments, we see the Nifty facing a cap at 21700-21800 on the upside, with the potential to surpass it only with robust participation from banks – a scenario we deem rare,” says Abhilash Pagaria of Nuvama Quantitative and Alternative Research.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
