Finance Minister Nirmala Sitharaman will present the Union Budget 2023 in Parliament on Wednesday and, like always, there are high expectations from her.
The entire country will be waiting for her speech with huge expectations, hoping for some positive announcements. Stock market investors, too, will also be tracking the Union Budget 2023 and the finance minister’s announcements will dictate how domestic equities react on February 1.
How does Dalal Street react to the Union Budget?
Any favourable announcement that can boost economic growth or spur private investment and consumption will be perceived as a positive move by investors on Dalal Street, and lead to a positive reaction from retail investors.
A top up in the production-linked incentive (PLI) scheme for existing sectors, increased allocation for infrastructure development, better-than-expected growth projections and income tax reforms will lead to a sharp climb in domestic equities.
Markets will also be keenly awaiting an announcement on capital gains taxation – any rationalisation in these will provide a massive boost to stock markets.
Announcements that are beneficial for sectors such as real estate or banking will also have a positive impact on a large number of stocks, ranging from financials, cement, metals, NBFC and more.
Markets could see an even bigger cheer if the finance minister announces any changes in income tax slabs or increases in exemption limits.
Any favourable changes to the new income tax regime could provide a boost to the domestic stock markets. Any corporate taxation changes, though unlikely in the budget this time, will also provide comfort to stock market investors.
However, if the announcements do not favour any particular sector or do not contribute to boosting income and capital expenditure, stock markets could react negatively and plummet. It may be noted that benchmark indices are hardly ever flat on budget day – it’s either a bull run or a free fall.
Stock markets have already turned nervous ahead of the Union Budget 2023, which will be announced by Finance Minister Nirmala Sitharaman on February 1.