Equity Market Insights Post-Union Budget 2024 - What Investors Need to Know

The Union Budget is one of the most important events of every financial year. Apart from changes in taxation, all eyes are usually on how it will likely impact the Indian stock market. This year was no different as we saw some quick market reactions before, during, and after the announcement of the Union Budget 2024.

As an investor, if you are wondering what the equity markets look like post-Union Budget 2024, then here’s everything you need to know.  Let’s explore the key takeaways from the Union Budget and what they could mean for you in the coming months.

Stock Market Reaction to Union Budget 2024

First off, you may be interested to know that the BSE Sensex and Nifty 50, India’s top stock market indices have been on a consistent uptrend since the start of the year. In fact, both these indices have beaten most major global indices in performance.

While the Nifty gained 18.7% and secured third spot, the Sensex jumped 17% in 2024 and secured fourth spot among major global bourses.

Now, let’s talk about the market reaction this year after the Union Budget announcement. The stock markets often see volatility before and after the Union Budget announcement every year. When key announcements are made in the budget, some stocks tend to rise while others experience a drop. This year's budget also led to some changes in stock prices.

After the finance minister presented the budget, the BSE Sensex saw a dip of 73 points, closing at 80,429.04, while the Nifty index dropped 30 points, ending at 24,479.05. The fall was largely due to unexpected tax changes that impacted investors.

For example, short-term capital gains tax on equity assets increased from 15% to 20%, and long-term capital gains tax went up from 10% to 12.5%. However, the exemption limit for long-term capital gains has been raised to ?1.25 lakh, providing some relief to investors.

Expert Take on Post-Budget Equity Market

Despite the tax changes announced in the Budget, equity markets continue to open up opportunities for investors. But how?

The government has shifted its focus to long-term economic development, which was evident in the announcement of the Union Budget. Sectors like agriculture, infrastructure, and financial inclusion formed part of the Budget’s focus areas. These could lead to growth in areas such as agri-tech, railways, and defence.

In the long term, financial institutions such as banks and NBFCs (Non-Banking Financial Companies) may also benefit from increased lending to small businesses, thanks to the budget's focus on MSMEs (Micro, Small, and Medium Enterprises). Infrastructure and engineering companies are likely to see steady growth as the government continues to prioritise infrastructure development.

How are Global Factors Influencing Indian Markets

Global factors also tend to influence the Indian stock market. For instance, in the last few years, rising interest rates in the US and Europe have lead to foreign investors pulling their money out of Indian markets. Such instances tend to cause short-term fluctuations in domestic stock prices. Additionally, supply chain disruptions and geopolitical issues can impact industries that rely on exports, such as IT and pharmaceuticals.

As an investor, you must keep an eye on these global trends when planning your investments, especially if you have exposure to sectors vulnerable to international changes.

What Should Investors Focus on Post-Union Budget?

While the Union Budget may cause short-term ups and downs, it’s essential to focus on the long-term potential of your investments. As a first, you must stay informed about changes in government policies and other macroeconomic changes. These could impact companies and, in turn, their stock prices.

You can also stay updated about sector-specific trends. For instance, in India, sectors like infrastructure, financial services, and agriculture may see positive growth due to increased government spending. If you continue to track such trends, you can be better equipped to adjust your investment strategy and potentially maximise portfolio returns.

Conclusion

Union Budget is just one of the factors that tends to influence equity market performance. However, keeping yourself updated on such announcements is very important for timely investment decisions.

If you are looking for deeper insights and guidance around the equity markets, you can explore various tools and resources available on Sharekhan Knowledge Centre. These are designed to help you plan your investment strategy more effectively so that you can aim for positive portfolio returns.