A balanced Budget 2024-25 should be a big relief for markets: Manish Jain

India Budget 2024-25 News Highlights: By raising LTCG tax to 12.5 per cent and STCG tax to 20 per cent, the overhang for stock markets gets removed

The Union Budget for FY25 clearly showed the path forward for the Indian economy. The basic style of under promise and over delivery continues. The India Budget 2024 didn't have any dramatic changes in revenue estimates and central government capex when compared to the interim budget. Incrementally, the focus was on job creation, infra build up, rural economy, and simplification of the tax structure both on direct and indirect side. 

The path to fiscal consolidation remains absolutely clear with the fiscal deficit being lowered to 4.9 per cent from 5.1 per cent stated in the interim Budget. Government borrowing, also, showed a clear declining trajectory and is expected to remain on the same path. This is a clear long term positive for the health of the economy and the rating of the country.

 

Over the last couple of years, there has been significant uncertainty around the capital gains tax. By raising LTCG tax to 12.5 per cent and STCG tax to 20 per cent, the overhang gets removed. While the government has clearly shown intent to deflate short term investing, the increase in LTCG tax is a negative.

Increase in STT on Futures and options taxations is a move in the right direction to discourage the speculative transactions in the market.

Meanwhile, removal of the indexation benefit in real estate is negative. However, reducing the capital gains tax rate from 20 per cent to 12.5 per cent provides long term clarity on taxation and may be positive for the incremental real estate demand. We believe that this is an indirect way of introducing the inheritance tax. 

Capex outlay for FY25BE has been increased by ~17 per cent over FY24RE to Rs 11.1 lakh crore (3.4 per cent of the GDP), same as interim budget. This was one of the biggest question marks from the interim budget and will alleviate a lot of concerns.

Special financial support for Andhra Pradesh including Rs 15,000 crore in the current fiscal – this is a positive for construction companies.

PMAY Urban – Housing needs of 10 million families will be met through investment of Rs 10 trillion– this should be positive for all cement companies.

Under PMAY, 10 million poor and middle-class people will be provided support benefits of Rs 2.2 trillion for affordable housing over the next five years.

Funding for 30 million additional houses under PMAY has been provided and Rs 2.66 trillion for rural infra development is positive for all cement companies.

Rural Development Allocation of Rs 2.66 trillion (up 11 per cent Y-o-Y), will boost rural consumption. The continued focus on capex spending and focus on rural spending bodes well for infrastructure and cement companies and also for the rural consumption overall which had been a pain point for quite some time now. This is a positive for FMCG and two-wheelers.

Overall, a balanced budget, which ensures policy continuity by the government, should be a big relief for the markets. The budget also underlines the strength of the Indian economy. We believe that equity remains a strong investment opportunity from a medium to long term perspective.

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Disclaimer: Manish Jain is Head of Fund Management (PMS & Equity Advisory), Centrum Ltd. Views expressed are personal