Read more about Budget 2018 and its Possible Impact on Stock Market on Business Standard. The future movements in the markets over the next month or so will be decided by the contents of the Budget 2018.
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The future movements in the markets over the next month or so will be decided
by the contents of the Budget 2018.
Lately both the major indices in India has scaled record heights, the Sensex has crossed
the 36000 mark whereas the Nifty has also breached the 11000 level.The future
movements in the markets over the next month or so will be decided by the contents of
the Budget 2018. Although in the period leading up to the Budget utmost secrecy is
observed but some information does filter through, other than that rumours and
informed speculations are also what that drives the sentiments of the markets. Generally
there are negative sentiments and expectations attached to the Budget thus investors
usually postpone buying decisions before the Budget is tabled. Thus in the past mostly
the benchmark index has fallen in the month leading up to the Budget and the markets
both Sensex and Nifty have seen gains after the Budget has been delivered. This has
been the trend in six out of the last nine Budgets. But the said trend has now been
broken with the markets touching new heights just before the Budget 2018. Few
numbers in the Budget 2018 such as that of fiscal deficit and disinvestment targets will
have a major impact on the direction of the bourses. Experts believe that the days
leading up to the Budget the markets will see a rally due to various anticipations and
right after the Budget profit booking in the stock market may be seen. However, there
will be opportunities for investment in select sectors also.
Expected Impact of Budget 2018 on Stock Market
It is largely expected that the Budget 2018 will be neutral for the stock markets thus no
sharp surge or dip in Indian indices is being expected. As the said Budget is the last full
budget before the Lok Sabha elections in 2019 and before multiple assembly elections in
2018 no major reforms are expected to be undertaken. Experts believe that in the near
future with record FII inflows, soaring investments in mutual fund, low interest rates
and a strong rupee against the dollar the outlook in the markets is expected to remain
positive. Although on the day of the Budget 2018 and the 48 to 72 hours period after the
same the markets are expected to remain extremely volatile. In the Budget 2018 the
markets would like to see a bump up in Government’s revenues to tackle fiscal deficit
but most likely the fiscal deficit target of 3.2% of the GDP would be missed by the
Government. The target is most likely to be revised to 3.4% which will have a somewhat
negative impact on the markets. The markets also expect the government to pursue
disinvestment agenda aggressively especially that of Air India. Relief in corporate tax
rates and personal income tax along with stabilization of the Goods and Services Tax
(GST) and increased public spending with focus on manufacturing, job creation and
rural distress are some other key expectations of investors that will have a major impact
on the markets.
Possible Reasons for Rise and Fall in the Markets after the Budget 2018
The FM most likely will try and strike a balance between popularism and fiscal prudence
in the Budget 2018. The Indian market is already at historical highs so experts believe
that even an industry friendly budget will have only a nominal impact. On the other
hand if there are some dreadful surprises in the Budget 2018 then even a crash cannot
be ruled out. One of the major decisions that the markets is hoping doesn’t materialise is
the introduction of long-term capital gains tax (LTCG) on shares.