30 Jan , 2022 By : Kanchan Joshi
The Budget 2022–23 will have to be a balancing act—supporting recovery while maintaining fiscal prudence, as per Edelweiss, as domestic recovery has been uneven/split so far and needs policy support. Besides, India is preparing for inclusion in the global bond indices soon, which warrants fiscal prudence, hence, it expects a modest consolidation in FY23.
The brokerage and research firm Edelweiss Alternative Research analyzed the indices performance, i.e., Nifty 50, Nifty Bank and Nifty Midcap 100 on the respective Budget Days for the past ten years.
Indices posted their biggest Budget Day gain in 2021 with the Nifty surging nearly 5% that day as investors cheered the announcement made by Finance Minister Nirmala Sitharaman. Though, in 2020, the index declined over 2% as the budget failed to live up to expectations.
"From markets’ standpoint, the budget may not be a big mover given the more challenging backdrop. Earnings, financial conditions, etc would be the bigger medium-term drivers. Increased rural allocation should support our call of lower-end consumption revival and our defensive bias in the portfolio," said Edelweiss.
The Union budget will be presented at 11 AM on February 1, 2022 in the Parliament. Meanwhile, the Economic Survey will be tabled at noon on January 31.
From the broader policy standpoint, the highlights could be spending rotating towards the rural sector, expanding the scope of PLI scheme, extension of 2019 tax cuts for new manufacturing units, and while the FM may refrain from large tax cuts, any plan to launch MNREGA-like counter-cyclical job scheme for the urban economy would be welcome, it added.
“In FY22, the government went for very large fiscal consolidation of 240 bp, and thanks to the buoyancy in tax collections, the fiscal target looks quite achievable," Edelweiss added.
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