Finance Minister Nirmala Sitharaman will present the Union Budget for the financial year 2024-25 on July 23. There will be many major policy announcements in it, which will have a wide impact. The stock market will also not remain untouched by this. The government can make important announcements on everything from futures and options (FO) trading to capital gains tax. Along with this, the market will also keep an eye on how much allocation each sector gets in the budget.
The stock market keeps a close eye on the Union Budget, as it directly or indirectly affects most sectors and companies. This is the reason why the stock market becomes a little cautious when the budget date comes closer and profit booking intensifies. Investors feel that there may be tax or other changes in the budget, which may have a negative impact on their investments. In particular, they keep an eye on whether there is any change in the Long Term Capital Gain (LTCG) tax or whether there is a change in the holding period of any asset class.
This time too, the stock market has become cautious before the budget as usual. Another concern is regarding futures and options (F&O) trading. For some time now, everyone from market regulator SEBI to Finance Minister Nirmala Sitharaman has been worried about the increasing number of retail investors in F&O trading. SEBI figures show that only 1 out of 10 F&O traders make a profit. In such a situation, there is a fear that tax on F&O earnings may be increased in the budget.
Experts believe that the Modi government is not thinking much about the capital gains tax rate right now. However, it can take some measures to rationalize the tax rate. This will increase the confidence of investors that the tax system will remain stable. These include retail investors as well as domestic and foreign institutional investors. At present, there are many capital gains tax rates in the country, which may vary according to the capital asset being transferred. However, rating agencies like Jefferies believe that the government may increase the capital gains tax for retail investors. At present, the short term capital gains tax is 10 percent and the long term capital gains tax is 15 percent. If any increase is made in this, the market can react to it immediately.
Financial fraud in the name of the stock market has increased a lot. Especially, through platforms like Telegram, Facebook and WhatsApp. Many times attempts are made to cheat investors in the name of famous financial personalities. Brokerage platform Zerodha founder Nitin Kamat and NSE chief Ashish Kumar Chauhan have complained that their names are being used in some fake messages. But, they did not suggest investing money in any stock. Many financial influential people have also been accused of manipulating share prices. In such a situation, it is expected that Finance Minister Nirmala Sitharaman may make a concrete announcement in the budget to stop fraud in the stock market.
How the stock market will move after the budget will largely depend on the announcements of Finance Minister Nirmala Sitharaman. Especially, the stocks of those sectors may rise more, for which the government will increase the budget allocation.
Experts believe that the government may increase capital expenditure in key sectors like railways, power, housing and defense in the budget. The government has a special focus on improving infrastructure in these sectors. If this happens, the market can give a tremendous response.
Consumption in urban areas has recovered to a great extent after the Kovid epidemic. Demand is also very strong. But, there is still sluggishness in rural areas. In such a situation, the Finance Minister can take measures to increase consumption in rural areas. If this happens, then the shares of FMCG sector can see a jump.
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