 "Nirmala Sitharaman")
Nirmala Sitharaman, Budget 2024
Over the next few days, as the markets read and digest the budget fine-print, they will also keep an eye on the ongoing June quarter earnings season (Q1-FY25), progress of monsoon back home and the policy actions of the Reserve Bank of India.
Globally, the developments related to the US presidential elections, geopolitical situation, crude oil prices are some of the factors that can sway market sentiment.
Meanwhile, here is how leading brokerages have interpreted the budget proposals.
Goldman Sachs
The government ticked all crucial macro-prudential boxes. Revenue targets look broadly achievable and tax assumptions realistic. The budget promised a policy framework for long-term economic development to set the scope for the next generation of factor market (land, labour, capital and technology) reforms in conjunction with state governments.
We remain positive on Indian equities given macro resilience and strong earnings delivery, which should keep its relative appeal intact despite elevated valuations. Continue to favor domestic sectors, including rural infrastructure, energy security, tourism and housing that align well with the measures announced in the budget.
Morgan Stanley
There are three big surprises. The first is the unique incentive scheme for job creation. Second is the simplification of the tax code, including unification of TDS rates and capital gains tax rates and rationalisation of import duties, removal of angel tax, and a promise for further simplification by the next Budget; and lastly, the lower-than-expected fiscal deficit.
The lack of populist spending is in line with expectation, although the increase in capital gains tax for equities is against our expectation of no change. We remain constructive on Indian equities, with a bias for large caps over small- and mid-caps. Overweight on financials, consumer discretionary, industrials and technology; underweight other sectors.
Nomura
Acceleration in government spending in line with the budget targets could add back some momentum to the growth cycle, following an election-driven lull. However, the key to stronger growth will be recoveries in both private consumption and private capex.
In terms of consumption stimulus, while the income tax cuts are targeted at consumers with a higher marginal propensity to consume, some positive impact could be countered by the potential hit from higher capital gains tax on their investments amid already tightening credit conditions.
UBS
Higher STT on derivatives transactions could lead to some near-term softness in the F&O segment. Lower individual tax burden in the new tax slabs could help support consumption (at the low-mid level). Removal of indexation benefits while calculating capital gains taxation on non-financial assets (like real estate/gold) may help make financial assets more attractive and formalise savings, and in particular hurt the real estate sector.
CLSA
Phillip Capital
While capital gains tax rates (short and long term) have been raised along with rationalisation across assets, we do not expect this to have a lasting adverse impact on equity market investments. Budget is a continuation of the interim budget with persisting focus on capex; incrementally highest priority given to sustainable employment creation; no signs of populism.
Motilal Oswal
Absence of the much-expected direct boost to consumption was a disappointment, increased focus on employment generation through skill development and marginally higher income in the hands of salaried class via adjustments in tax slabs in the new tax regime and higher limits for standard deduction may indirectly benefit consumption demand marginally. The combination of around 7 per cent GDP growth and nearly 15 per cent Nifty earnings CAGR in FY24-26, stable currency, moderating inflation, and buoyant retail participation may keep sentiments strong.
Emkay Global
The increase in capital gains tax has been marginal and we do not see it as a major worry. The tax on buyback could adversely affect payouts and, at the margin, hurt return ratios and valuations of some high-cash generators; many companies, however, may not change their behavior. The increase in STT on derivatives is also relatively minor. Overall, the increase in taxes on capital markets has not been severe and is unlikely to affect market valuations materially.
First Published: Jul 24 2024 | 11:26 AM IST