Budget 2024: These are the winners and losers of ‘vulnerable’ stock market

Budget 2024: A small hike in capital gains tax was not material while direct incentives for employment was a big measure, it said.

Domestic brokerage firm Emkay Global called the Union Budget 2024 ‘solid’ highlighting policy continuity. Fiscal consolidation path was maintained and the focus on capital expenditure continued, it said. A small hike in capital gains tax was not material while direct incentives for employment was a big measure, it said. On the stock market, the brokerage said, “The stock market is vulnerable at these valuations and could correct in the short term. Our favored sectors are FMCG, IT and consumer durables, and we are negative on industrials and financials.”

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

Emkay Global said it remains cautious on the market as the Budget is unlikely to move the needle significantly.

"On the other hand, we are looking at a tepid earnings season, as topline growth remains moderate and margin tailwinds are petering out. Also, rate cuts are at least 1-2 quarters away. On the other hand, valuations are stretched at 21.4 (1-year forward P/E of Nifty), with no imminent upgrades," it said.

Increase in LTCG and STCG has been marginal and is not a major worry although tax on buyback could adversely affect payouts, it said. The increase in STT on derivatives is also relatively minor, it noted, adding, “Overall, the increase in taxes on capital markets has not been severe and is unlikely to affect market valuations materially.”

Retail, NBFCs, and MFIs in growth mode could see some benefits too, it said, explaining, “The other is that half the windfall gain from the RBI dividend was diverted to revex, with transfers to states the most prominent expenditure head. We see both as positive, and address the K-shaped post-Covid recovery. Our positive stance on FMCG and two-wheelers is reinforced by these moves.”

Emkay Global noted two positives in the budget- first for the jewellery sector which is set to benefit from the cut in gold import duties, and second are battery players who are likely to gain from lower import duties on critical metals.

"Capital market participants were hit by the CGT and STT, but the impact is negligible. There was a relief rally in some stocks, as there were expectations of more severe measures, especially on derivatives trading," it said.