Confused where to invest? Stock market may like Budget 2024 if Nirmala Sitharaman focuses on these themes

Elara Securities anticipates positive market response to Union Budget 2024 emphasizing fiscal consolidation and targeted growth.

The Indian stock market may cheer following the Union Budget 2024 as domestic brokerage Elara Securities said that the market has already priced in social security measures that could be introduced by Finance minister Nirmala Sitharaman. It said, “As such, unless budget grossly disappoints by hiking capital gains tax rate or surprises on bold reforms, we think the narrative of the market will be decided by the earnings growth hereon.”

Stock market: A bird flies past a screen displaying the Sensex results on the facade of the Bombay Stock Exchange (BSE) building in Mumbai.(Reuters)

In order to lift the mood of the market, the Budget will have to focus on three themes: fiscal consolidation, consumption boost and capex spending.

Elara said, “Commitment to fiscal glide path through FY26 could be credit rating positive. Given the rate cut cycle is also around the corner, rate-sensitive sectors, such as autos, banks, IT and pharma, are set to benefit.”

It added, “Measures to bolster rural income, wages and consumption would initially drive-up sales for retail and small-ticket white good companies with follow-on impact on FMCG in the later stage.”

On capital expenditure, the brokerage said, “Markets are likely to respond favorably to targeted spending that drives growth in these critical sectors. While we continue to like aerospace & defense and capital goods, significant froth and high valuation suggest limited upside.”

Anuj Bajpai, Co-founder and CEO, Liquide warned that there could be volatility in the stock market owing to which investors should remain vigilant for the typical market pattern of “buy on rumours, sell on news.”

He advised, “Prioritize investments in sectors poised to gain from the budget. Consider stocks like M&M, L&T, Ultratech Cement, Chambal Fertilisers, Ircon, BEL, Reliance Industries, PFC, NTPC, Dabur, HUL, and Aavas Financiers. Additionally, park funds into defensive sectors like FMCG, Healthcare, and Utilities, which typically maintain steady performance through different economic cycles.”