Sector-specific Predictions: Who Will Gain and Who Will Lose?

Introduction

As India Inc. awaits the full-fledged Union Budget 2024 with bated breath, different sectors of the economy will be keenly watching what the finance minister (FM) has in store for them. During Budgets, the FM rolls out various allocations for different sectors of the economy. So, what's the budget forecast for various sectors at this time? Let's find out.

Overview of key economic indicators

Before delving into budget predictions for various sectors, let's first examine the key economic indicators that will give you an idea about the economy's overall health. India's gross domestic product (GDP) grew at 7.8% in Q4FY 24, and the nation's economy grew at 8.2% in FY 24 compared to 7% in FY 23.

Retail inflation in the country has been largely stable after recording a spike post-COVID-19. In May 2024, it was 4.7% and has been on a downward spiral since January 2024. However, food inflation, which forms around 50% of the retail inflation calculation, is still a cause of concern.

The country's fiscal deficit which had increased to 9.2% of the GDP in FY 21 has seen a gradual decline. It's down to 5.6% in FY 24. Also, the ratio of revenue deficit to fiscal deficit has witnessed an improvement, going down to 46.3% in FY 24 from approximately 80% in FY 21. India's gross tax revenues grew by 13.5% in FY 24 driven by a rise in direct and indirect taxes.

Government focus area and policy directions

The FICCI Economic Outlook Survey says the Union Budget should focus on tax reforms and employment generation. The budget forecast says it will lay the roadmap for 'Viksit Bharat' by 2047. The government is likely to focus on macroeconomic management, social welfare schemes, capital expenditure, business reforms, research and innovation, and policy rollout in these directions.

In addition to these, climate change and financial services are also major themes on which the budget will focus.

Predicted winners

There's a palpable feeling that the government will continue to focus on infrastructure, urban development, renewable energy, defence, railways, housing, and water projects in this budget. Budget predictions say stocks of companies in these sectors can gain from post-budget announcements.

The government is expected to continue focusing on the development of these sectors to power India's economy going forward.

Predicted losers

It will be too early to predict the losers from Union Budget 2024. One will have to wait and watch what the FM has in store on July 23. The budget is anticipated to be progressive and balance fiscal prudence with populism.

Sector wise investment strategies

As per experts, you should prioritise investments in sectors like infrastructure, railways, defence, renewable energy. That said, it's important to note that markets generally trade with a negative bias before the budget. It's crucial to avoid knee-jerk reactions following the budget. Once the government clearly defines its strategies, you can incrementally invest in sectors benefiting from them.

However, it's vital to factor in your goals and risk tolerance before investing. Equally essential is to diversify optimally and not put all eggs in one basket.

Historical performance of sectors post budget

Expert opinions and market sentiments

Experts believe the upcoming budget will likely balance capex expenditure and welfare schemes. While there has been a growing demand among the middle class to offer tax soaps, the chances are slim. The prevailing market sentiments say that the Union Budget 2024 is likely to be balanced and largely adhere to the direction established in the Interim Budget. Stock market participants feel that the government will largely walk on the steps of fiscal prudence to drive India's growth.

Conclusion

While budget forecasts and predictions are many, the actual story will be known on July 23. One will have to wait and watch what the government has in store for India Inc. and the common man in what is being touted as its biggest challenge for the Modi 3.0 government post-Lok Sabha elections.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

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