‘Policy stability, tax-related stability must for market stability’: FM Sitharaman at Viksit Bharat 2047

Union Finance Minister Nirmala Sitharaman today said that ensuring policy and tax-related stability is very crucial for ensuring market stability. Speaking at ‘Viksit Bharat 2047 – Vision for Indian Financial Markets,’ an event organised by the BSE in Mumbai, Sitharaman said the government’s strategy is focused on an investment-led growth combined with inclusivity with an element of welfare.

“The government’s strategy is focused on an investment-led growth combined with inclusivity with an element of welfare, more from the point of view of the empowerment of the poor, not so much from the point of view of entitlement for any section,” Sitharaman said, adding that the government is confident that PM Narendra Modi will emerge victorious in the ongoing Lok Sabha elections to return to power for a third term.

She highlighted that the rapidly evolving dynamic of household savings. She noted that families are actively opening demat accounts believing in the Indian stock market.

She said that households savings is finding way into equities, shows the trust in the market. “Middle class families realise that even if it is risk laden, there are better returns,” she added.

Sitharaman said the persistent flow of domestic savings into the stock market has played an important role in becoming a counter-balancing force ‘when FPIs come and go’.

She also spoke about the importance of a stable government and its role in shaping the development trajectory of any nation. “…For markets to make that difference to a growing economy, I get to talk about what is important in this election atmosphere: Stability of government, of policies, is key for efficiency of markets.”

Union home minister Amit Shah on Monday told a media channel that one must not connect the recent stock market movements to general elections 2024, as he advised stock investors “to buy before June 4”, the date for Lok Sabha election outcome, expecting the domestic stock market to shoot up going ahead.

She added the Indian stock market has posted a good performance better than everyone’s imagination amid uncertainty across the globe.

It is to be noted the headline Nifty50 index has delivered a return of about 21 per cent (up 3,903.1 points since May 12, 2023) in the past year, on the back of good growth estimates, low inflation, and foreign investors leaning towards India as an investment destination.

Of late, Sensex saw a drop due to various factors. On Monday, Home minister Amit Shah said investors should not connect the recent stock market movements to general elections 2024. He said investors should buy stocks before June 4, the date for the results of Lok Sabha election will be declared, hinting at a stock market spike after PM Modi reelection. 

“I can’t anticipate stock market moves. But normally whenever a stable government is formed at Centre, the market sees a rally. I see 400-plus seat wins (BJP/NDA), a stable Modi government coming, and thus market rising,” Shah told a news channel.

Nomura India cited recent opinion polls to suggest a BJP win and policy continuity post 2024 general elections.

“The government may focus on the more politically contentious reforms around the factors of production including land, labour and capital; judicial reforms; and simplifying direct and indirect tax administration, including bringing electricity, oil and gas and alcohol under the GST ambit. The government is also likely to further focus on improving the ease of doing business for foreign investment and laying the groundwork for next generation sectors,” it said.

PhillipCapital, on the other hand, said there could be a potential market rally in the event of the BJP-led National Democratic Alliance (NDA) surpassing the 400-seat target. The brokerage firm also advised investors to monitor subsequent election phases closely, recognising their potential impact on market dynamics.

“If a lower 300-330 seats for the NDA results in a knee jerk market reaction [a fall], we would treat it as a buying opportunity. A further worsening of voter turnout in the following election phases could have a bearing on election outcome and equities – so we would keep a close watch,” the domestic brokerage said.

Brokerage Mirae Asset said if BJP comes to power, all eyes will be on the July Budget to see if there are some changes in direct or indirect taxation, MSP policy, and MGNREGA payments. In the long-term, the focus would be on infrastructure development, farm laws, skill development, and creating employment on the manufacturing side to spur demand from rural India, Mirae Asset Capital Markets said.


Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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