Over to the Budget Now

Welcome back, esteemed readers, to another issue of navigating the overcharged equity market. Despite all the predication that the market may fall after election, it has continuously been gaining strength. In the last one month, the market capitalisation of BSE-listed equity shares has increased by a huge ₹24 lakh crore. To give you a context, the latest data from the Association of Mutual Funds in India shows that pure equity funds have assets under management of ₹27 lakh crore.

As we inch closer to the much-anticipated Union Budget, a sense of cautious optimism hangs in the air. Since the start of the last decade I have witnessed 17 such budgets, including three interim budgets. Our analysis shows that the average returns a week prior to the budget is around negative 0.45 per cent. This time around we have already seen a sharp rally in the last one month. Hence, we may see some profit-booking in the near term. On the other hand, the returns one week after the budget is announced are generally positive as the uncertainty is over.

The average one-week returns post budget presentation is 1.32 per cent for Nifty. This year’s budget holds unique significance, being the first full-fledged budget presented by the newly elected coalition government. Traditionally, the Union Budget has been a landmark event for the Indian equity market, often triggering a flurry of activity and price movements at sector levels if not at the index level.

Will the Union Budget 2024 be a game-changer? In my opinion, it may not be so. As has been witnessed, the government has already allotted all the important ministries that were as held during their earlier stint of governance. Hence, we believe that the government would opt to continue with its fiscal prudence. The budget is not likely to introduce any radical reforms to allay investor sentiments. This will be a positive sign for the market.

Continuity and stability are crucial for investor confidence. It appears that the budget is likely to reaffirm the government’s commitment to fiscal discipline and introduce measures to bolster economic growth. This will certainly send a strong signal to the market. Additionally, election promises made by the ruling party, such as affordable housing, healthcare initiatives and renewable energy projects, should also give a boost to these sectors.

So, should you base your investment decisions solely on the budget? Absolutely not! Don’t let the budget dictate your entire investment strategy. It’s just one factor or rather just a piece of the bigger puzzle. The results of the first quarter of FY25 have started to unfold and they need to be watched closely so as to make appropriate changes in your portfolio. In our cover story, we have taken a close look at the trends that are taking evolving. These trends are identified based on how the economy is going to shape up going ahead.

We have identified some sectors that will play an important role in the Indian economy going ahead. There are many companies across the sectors and industries that are likely to benefit out of the ongoing economic transformation. A long-term investor can make a robust portfolio out of these sectors. In addition to our cover story, this issue includes several special reports and features designed to help you identify new trends and promising companies. As always, remember, successful investing is a marathon, not a sprint. Stay calm, be informed and remain tuned to the developments taking place around the world.

RAJESH V PADODE
Managing Director & Editor