Analyzing India

Investors' Expectations: Knee-Jerk Reactions And Volatile Oscillations Aside, Budget May Remain A Non-Event


After claiming an absolute majority again in the 2019 General Election, the Narendra Modi Government is slated to come up with their first budget of the second term on Friday, the 4th of July, 2019. Many expectations have been building up around this event, which has always been one of the most important domestic events in a given year.

All industries represent different sectors, and people at large from the various strata of society expects something or the other from the Government in every budget. Investors are no different. At this point, it would be interesting to take a look at what can we realistically expect from the 2019 Union Budget.

One of the significant expectations from the budget is the lowering of both Short- and Long-Term Capital Gains Tax. The other long-pending hope is either the lowering or complete removal of the STT (Securities Transaction Tax). Any tinkering to these issues could spark a positive reaction from the markets.

Apart from this, investors would also like to hear from the FM the steps that the Government might take to induce growth. The overall slowdown has been a concern; inflation has not come down to the level it should have been otherwise. Additionally, the previous rate cuts have not yet been transmitted fully to the end customers.

Amid all these expectations, investors need to keep in mind that, while the budget that was presented in February was technically just supposed to be a Vote-of-Account, the Government went ahead with a full-fledged one anyway. So, in all likelihood, there will be little suspense left in the coming budget, which may largely remain a non-event.

Beyond this, the Government is also grappling with the issues of slightly widened fiscal deficit. Addressing that deficit would require an act of delicate balancing by the Government while also working to induce growth without disturbing the macro-economic factors much.

In a nutshell, investors should not expect moons and stars from the Government, as this Budget as it is likely to be a mere extension to what was presented in February. Apart from this, with now being equipped with a firm mandate, the Government may not hand out too many goodies or take populist measures, but they may take some steps which may look bitter in the short term but could prove better for the economy in the longer term.

All in all, the headline index NIFTY has appreciated more than 7% since February. The broader technical and the global macro environment do not provide a good ground for any substantial rally. Apart from any knee-jerk reactions that they may give, the 2019 Union Budget may largely remain a non-event for the markets.

Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst

Milan Vaishnav
About the author: , CMT, MSTA is a qualified Independent Technical Research Analyst at his Research Firm, Gemstone Equity Research & Advisory Services in Vadodara, India. As a Consulting Technical Research Analyst and with his experience in the Indian Capital Markets of over 15 years, he has been delivering premium India-focused Independent Technical Research to the Clients. He presently contributes on a daily basis to ET Markets and The Economic Times of India. He also authors one of the India's most accurate "Daily / Weekly Market Outlook" -- A Daily / Weekly Newsletter,  currently in its 15th year of publication. Milan's primary responsibilities include consulting in Portfolio/Funds Management and Advisory Services. His work also involves advising these Clients with dynamic Investment and Trading Strategies across multiple asset-classes while keeping their activities aligned with the given mandate. Learn More
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