07-Feb-2023
2 mins read
Indian Markets have been one of the major outperformers in the calendar year 2022 where the global markets came under serious selling pressure amid the ongoing war between Russia and Ukraine and the surging inflation numbers. Markets participants expected the ongoing calendar year to be as good as 2022 where Indian equities have shown immense resilience. And in a major setback, at a go, the stocks came into the hands of the bears starting with a steep sell-off in the Adani group stocks after the American whistle-blower and short-seller research firm Hindenburg Research released a shocking 106 paged short sell research report with many serious allegations on the Adani group’s debt and the sharp rise in the share’s prices of the various subsidiary companies in a short time frame.
Apart from the aforesaid development, domestic market participants were also keeping a close eye on the Union budget 2023-24 which was unleashed by our finance minister Nirmala Sitharaman on February 01 and was broadly welcomed by the market and the industry. This was the last full budget by the existing central government before the general elections which is due early next year.
In the Union Budget of 2023-24, the central government has given a roadmap for the next 25 years. The Budget has given key priority to 5 points namely, Financial Sector, Green Energy, Youth focus, Inclusive development, infra, and development, and reaching the last mile.
Economic Data:
The Economic Data released by the government pegged India’s GDP growth for FY23 at 7% which is slightly higher than RBI’s estimates of 6.8%. While Nominal GDP growth is estimated at 10.5%. Fiscal Deficit at 6.4% of GDP for FY22-23 and Forecasted target fiscal deficit of 5.9% of GDP for FY23-24 and 4.5% of GDP by 2025. The FM has estimated that gross tax revenues will rise by 10.5% to 33.61 lakh crore.
Measures announced by the FM in the Budget:
In the Budget, FM announced a slew of measures, which have an impact on various sectors. Some of the measures announced and their impact on the respective sector are listed below:
Tax Simplified: The biggest announcement in the Union Budget this year was simplification of the tax structure. The tax slabs were modified in the new tax regime to benefit the new individual taxpayers. The total number of tax slabs under the new scheme was simplified from 7 slabs to 5. The Government also income eligible from rebates from 5 lacks to 7lakh. Max Surcharge was also reduced from 37% to 25%. This step of the government is expected to leave more income in the hands of taxpayers which in our view will be used in consumer discretionary spending which in turn is good for the Consumer durable and FMCG sector.
Capex Spending: The second biggest announcement that was made in the budget was relating to capex spending. The government has increased the allocation to capex spending by almost 33% to 10 lakh crores. This is a huge boost to all the sectors that are directly/indirectly involved in infrastructure-related activities. In our view, this is beneficial for the Steel, Cement, and allied sectors.
Railways: The allocation for Railways has been the highest so far. The allocation of 2.4 lakh crore rupees will act as a booster for the companies which are involved in the related activities
Credit Guarantee Schemes: The government has announced infusing 9000 cr in the corpus to revamp the Credit Guarantee scheme.
Animal Husbandry: Various steps have been announced in the budget that provides a much-needed push for the Animal Feed Sector companies. Some of the measures that were announced include: – Relief on customs duty on the Import of shrimps, Allocation of 6000 crores to boost fisheries.
Carbon Emission Targets: The center in the budget has also adhered to its carbon emission targets. The FM has allocated 35000 crores for Energy Transition Investment where it has announced its target to reach annual production of 5MMT Green hydrogen by 2030. &% new biogas plants at urban centers were also announced.
CNG Plants: The government has also set aside 10,000 crore rupees for setting up CNG plants at various places identified. The other steps include 10,000 crores allocated to sugar cooperatives. Promotion of Tourism by developing 50 destinations selected on challenge mode and changes in the customs duty rates on various articles.
Mahila Samman Saving Certificate: The Finance Minister has announced to launch of a small savings scheme, Mahila Samman Savings Certificate in celebrating the Azadi ka Amrit Mahotsav. The small savings scheme is having a tenure of two years and will offer an interest rate of 7.5% which is an attractive scheme in the current scenario.
Senior Citizen Savings Scheme: The maximum investment limit for the Senior Citizen Savings Scheme has been increased from Rs 15 lakh to Rs 30 lakh in Budget 2023 by the finance minister. On the other hand, the Central government has also raised the interest rate of this scheme to 8%.
To conclude, the current Budget was a balanced budget with no populist announcements with respect to subsidies and all of which were liked by the market and industry experts. The government have given more focus to the overall growth trajectory and a drastic increase in the capex expenditure of more than 33% in a single year is a sign of the same. From the market perspective, the aforesaid announcements have been taken positively by the market participants and are expected to be on the bullish side and any corrections will be bought in by the market participants in the coming weeks.