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  1. 5 ways the budget affects the stock market

5 ways the budget affects the stock market

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Upstox

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2 min read • Updated: February 2, 2024, 2:35 PM

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Summary

The Interim Budget 2024, key to understanding future market dynamics, will focus on crucial areas like government fund allocations, subsidies, tax changes, fiscal targets, and divestment plans. These elements range from government spending patterns to adjustments in subsidies and taxes. The government's goals and divestment strategies play a pivotal role in shaping market sentiment and influencing stock market movements.

Predicting the market any day is tricky, but on budget day, it's a different ball game. So, why not dive into the 5 key aspects of the budget that can have a substantial impact on the stock market?

💡 Key Allocations - Spending Spree

Understanding where the government allocates funds is crucial. With an interim budget approaching, expect fund allocations to prioritise essential government services, ongoing schemes, and urgent matters. Increased government spending often translates to more jobs and higher consumption, potentially good news for the market.

💰Subsidies - Rural Lifeline

Subsidies, especially for food and fertilisers, are the lifeline of the rural economy. Did you know that one-ninth of India's total budget spending in FY24 was on food and fertiliser subsidies? Any change in this amount can impact fertiliser companies and rural consumption, subsequently affecting FMCG and fertiliser stocks.

💸Taxes - Financial Chess Moves

Changes in direct or indirect taxes, such as income tax or customs duty, can sway the market. Higher taxes may impact consumer spending, making tax adjustments a focal point for traders. Duty changes can influence the prices of goods, shaping the financial landscape for businesses.

📊 Setting Goals - Investor Signposts

The budget outlines government targets for fiscal deficit, GDP growth, and more. Investors consider these targets as signposts, providing insights into the future economic landscape. Positive goals, like a higher GDP target, can boost market sentiment.

📈Divestment Plan - Shaping the Market

The government's divestment plan, indicating which companies will see reduced government stakes or be sold, is crucial for investors. This year, the focus might be on the divestment of Shipping Corporation of India, Concor, and the privatisation of IDBI Bank. Investors closely monitor these moves as they can significantly impact the market.