Anticipating Budget 2024: Pro-Growth or Populist? Market Perspectives and Expectations

The expectations for Budget 2024 are high, with many wondering whether it will be a pro-growth or a populist budget ahead of the General Elections 2024. The focus seems to be on analysing the Budget from February 2023, which prioritised capital expenditure (capex) over popular measures to woo voters. Last year’s Budget allocated 19.5 per cent of expenses towards capex, marking the highest in two decades, indicating the government’s long-term planning approach.

This strategy is seen as crucial for a nation’s prosperity, as capital investments yield benefits over a longer period, in contrast to immediate, short-term gains from revenue expenditure. The government’s clear focus on enhancing infrastructure and sectors like roads, railways, defence, and airports is seen as vital for India’s growth from a two trillion to a ten trillion-dollar economy.

While the current budget might not bring substantial changes for the stock market and investors, any important announcements will still be noted and considered for their potential impact. The market is already factoring in the General Elections in 2024 and the expected victories of the current government in key Indian states. However, the actual results, especially the majority with which BJP might secure the victory, are still anticipated to be significant triggers for the market.

The triggers for the market this year seem to be largely centred around political events and economic policies. The Federal Reserve’s stance on inflation and interest rates is seen as a critical determinant, with any change in this stance potentially serving as a trigger for the market. The US elections later in the year are also expected to be pivotal, leading to market volatility.

Investors are cautioned against being swayed by market spikes following positive developments and are advised to focus on opportunities during periods of uncertainty or volatility. The strategy recommended is to “buy on dips” — purchasing when prices are low in anticipation of future gains. Overall, 2024 is expected to be characterized by high volatility due to several significant events on the horizon, suggesting a cautious and strategic approach to investment.