Budget Expectations From The Stock Market
BUSINESS ECONOMICS|March 1-15, 2018

Every year, at the time of the Union Budget, there is a lot of buzz.

Varsha Singh

The common man waits for favourable announcements anxiously, but there are people who keenly follow what’s written between the lines. The Union Budget is perhaps the most watched event in the economic policy making in India. The core fiscal issues - taxation, expenditures, and the fiscal deficit - are obviously important for macroeconomics. When the government proposes changes in policies, the expected impact on the affected sector and its companies cause mayhems in the stock market. There is heavy buying and selling seen ahead of the Budget as investors analyse expected announcements and try to safeguard their investments. The stock market reacts depending on how the investors interpret the economic activities.

Indian stock market at present

According to Equity Master, share markets in India have continued the momentum and are currently trading near alltime high levels. Sectoral indices are trading on a positive note, with stocks in the banking sector and stocks in the metal sector leading the gains.

Indian companies raised a record $ 46.5 in debt and equity in 2017, the highest amount in the last decade. 64% of these funds are from the financial sector. What is interesting is that the energy and power sector was the second highest in raising funds. Also, amongst the financial sector companies, Power finance corp. Ltd. (PFC) which raised $ 3.5 billion was one of the largest fundraisers.

Budget reaction in the last 3 years

2017- The Union Budget 2017-18 provided the feel-good factor as the Sensex leaped close to 486 points to close at an over 3-month high of 28,142, with financial and realty stocks powering the momentum. Markets welcomed the budgetary proposals of infusing 10,000 crore in public sector banks and keeping long-term capital gains tax (LTCG) and shortterm tax rate (STCG) unchanged for the capital market.

Additionally, Finance Minister Arun Jaitley proposed that category I and II foreign portfolio investors (FPIs) should be exempted from taxation on indirect transfers, which made investors a happy lot. Both key indices Sensex and Nifty reclaimed their key levels of 28,000 and 8,700 for the first time, scoring their biggest single-day gain since October 2016.

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