Budget 2024: Booming stocks, more cash in hand. What Nirmala Sitharaman may offer in July

India’s stock market is poised to grow by up to 20% this year, driven by government spending and strong corporate earnings.

The Budget expected later this month is expected to enhance consumer spending and infrastructure development. 

As per a Bloomberg survey, over half of the 24 strategists and investors see NSE Nifty 50 Index could reach 26,000 points by year-end, with some foreseeing even higher gains. So far, the benchmark index has surged 12% to a record high.

A reduced majority for Prime Minister Modi’s BJP has led investors to focus on the consumer sector, anticipating more populist measures. 

Additionally, an early monsoon has boosted prospects for agricultural companies.

Thirteen of the surveyed analysts project robust earnings growth for Nifty components, while five caution that future earnings optimism might be excessive. Bloomberg Intelligence data shows that earnings per share for MSCI India Index companies are expected to rise 15.6% in 2024, compared to a 10% increase for Chinese firms. Investors are keenly awaiting the Budget, which will outline Modi’s policy priorities under the new coalition government. 

Half of the respondents expect a mix of incentives for consumption and continued capital expenditure on infrastructure. 

A quarter believe the focus will be primarily on capex, and another quarter on boosting consumer demand.

Respondents are optimistic about consumer discretionary stocks, followed by financial and commodities shares. It’s not just the investors who are expecting a Budget cheer. The Indian taxpayer could be in for a pleasant surprise with the Centre considering tax relief for individuals. Among the options being evaluated is an increase in the exemption limit under the new regime to Rs 5 lakh from the current Rs 3 lakh per annum. Another option being considered is nil tax liability on income up to Rs 8 lakh per annum, aligning the tax structure with the criteria for the Economically Weaker Section (EWS). 

EWS includes all those under the general category whose gross annual family income is below Rs 8 lakh.

If the Centre proceeds with the first option of increasing the exemption limit under the new regime to Rs 5 lakh from Rs 3 lakh per annum, those with income above Rs 7.5 lakh will benefit the most. The change in tax slabs will reduce the tax outgo by an average of Rs 10,000.

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