What Should be Your Investment Strategy Ahead of Full Budget 2024?

The new alliance government's finance minister, Nirmala Sitharaman, has the first task of submitting the entire budget for 2024–25 in nearly a month. The full 2024 budget is planned to be unveiled in July. It will be interesting to see if the government pursues aggressive fiscal consolidation in light of the Reserve Bank of India's (RBI) record Rs 2.1 trillion dividend or sticks to the fiscal deficit target of 5.1% of GDP as outlined in the interim budget presented in February.

When does the 2024 full budget come out?

The Indian stock market has undergone a significant change after the Lok Sabha elections. Strong gains of 6% have been seen for the Nifty and Sensex indices since the election results closed on June 4, 2024. Following the release of the election results, attention is turning to the upcoming budget for 2024, which is set to come out in the first or second week of July.

Any changes in tax policies can influence corporate profits and investor behaviour. If the government decides to reduce corporate taxes in the full budget, it could lead to higher stock prices as companies retain more of their profits. 

However, tax increases may reduce business profitability and cause investors to re-evaluate the company's worth. Likewise, modifications to personal income tax rates affect the purchasing habits of consumers. 

Due to advancements in the budget, an individual might be able to afford a better car, dine at his favourite restaurant (providing a benefit to the food industry), and much more. This advantage is not direct. But with that, they might use their larger savings to make direct stock market investments, which might push the market up.

Key Highlights from the Interim Budget 2024

The Interim Budget 2024, presented by Finance Minister Nirmala Sitharaman, focuses on the government's spending plans for the first half of the upcoming fiscal year. The key highlights include:

Taxation

• No changes in direct or indirect tax rates
• Income tax demands up to ₹25,000 (till 2009-10) and ₹10,000 from 2010-11 to 2014-15 withdrawn, benefiting around one crore taxpayers
• Tax benefits to start-ups and investments made by sovereign wealth or pension funds extended by one year till March 31, 2025
• Gross tax revenue target for FY25 increased by 11.46% to ₹38.31 lakh crore
• Direct tax collection target set at ₹21.99 lakh crore, while indirect tax target is at ₹16.22 lakh crore

Welfare Schemes

• Affordably priced housing program for the worthy middle class, with an emphasis on individuals residing in rental homes, slums, chawls, or unlicensed colonies
• Extending coverage of Ayushman Bharat healthcare to all ASHA and Anganwadi workers and attendants
• Allocation of ₹3 lakh crore under the gender budget, a 40% increase over the previous year and the highest increase in the last decade

Infrastructure and Development

• Capital expenditure increased by 11% to ₹11.11 lakh crore
• Fiscal deficit for FY25 projected at 5.1%, lower than the revised estimate of 5.8% in FY24
• Government to borrow ₹14.13 lakh crore in the next fiscal, lower than ₹15.43 lakh crore in FY24
• Forecasted nominal GDP growth for FY25 is 10.5%.

Investment Strategy Ahead of Budget

Following Budget 2024, investors should take a strategic, long-term approach, focusing on sectors that are poised for growth as a result of the government's most recent policy initiatives. Investors should place a higher priority on diversification as the market processes the budget's implications. They should allocate their portfolios to industries that will profit from the government's emphasis on sustainable development and digital transformation. To successfully navigate the post-budget market landscape, one must remain informed and flexible.

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