Stock Market & Budget 2014

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All eyes are on the budget to be presented in the Parliament by India's new Finance Minister, Mr. Arun Jaitley. The future direction of the stock market is significantly dependent on the budget. Here are few pointers that explain stock market expectations of Budget 2014-15.

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Stock Market & Budget 2014

  1. 1. Stock Market & Budget 2014
  2. 2. There’s anticipation in the air!
  3. 3. Sensex & Nifty have scaled new peaks...
  4. 4. All eyes are now on the Budget 2014 & Finance Minister Mr. Arun Jaitley
  5. 5. The future direction of the stock market is significantly dependent on the union budget.
  6. 6. Here are 4 pointers that explain stock market expectations of Budget 2014
  7. 7. #1 Fiscal Deficit
  8. 8. A high fiscal deficit leads to a higher borrowing by the government. When that happens, it competes with businesses for money in the market. This keeps interest rates high and stokes inflation. Government’s expenditure What is Fiscal Deficit? Government’s earnings
  9. 9. What to watch? A key thing to look for in Budget 2014 would be an announcement relating to the Fiscal Responsibility and Budget Management Act. Markets will look for specific targets to bring down the fiscal deficit over the next few years.
  10. 10. What will be the impact? A lower fiscal deficit in FY15 will ensure that the government borrowing does not increase sharply. RBI would be able to, then, lower key borrowing rates. Stock markets thrive when interest rates fall.
  11. 11. #2 Productive Spending
  12. 12. What needs to be done? Subsidies on fuel, fertiliser and food form a large chunk of the government’s spending. To control the fiscal deficit, the government may have to cut this expenditure. However, it needs to continue with productive spending on aspects like healthcare, education and physical infrastructure.
  13. 13. What to watch? The capital expenditure on infrastructure in Budget 2014-15 would be watched closely by the stock market. A lot of businesses rely on the spending by the government.
  14. 14. #3 Boost Revenue
  15. 15. How can they boost revenue? Fiscal deficit can be controlled through an increase in revenue too. The stock market expects the new government to implement the goods and services tax (GST), which could lead to a rise in revenue. This can also help the economy grow faster than the current 5%, over the long-term.
  16. 16. What to watch? The stock market would look at practical timelines for implementation of goods and services tax. They would also want the government to implement the Direct Tax Code that simplifies the tax structure for individuals and companies.
  17. 17. #4 Disinvestment
  18. 18. What happened in the past? The National Democratic Alliance pushed for disinvestment aggressively between 1999 and 2004. They had a cabinet minister in Mr. Arun Shourie to steer the initiative then. However, in this regime, there is no disinvestment minister.
  19. 19. What to expect this year? The stock market expects this government to do much better on disinvestment than the previous United Progressive Alliance regime. In Gujarat, the government in the past has empowered public sector companies and turned loss-making ones around.
  20. 20. What to watch? The stock market expects greater autonomy to public sector companies. In the Budget, investors would look at planned selloff of stakes in public sector companies and the amount the government expects to receive.
  21. 21. Final Note In a nutshell, investors are looking forward to steps to rein in the government spending thereby controlling the fiscal deficit. At the same time, they would look for a boost in revenue by implementing GST and disinvestment.
  22. 22. To learn more about the union budget, click here.
  23. 23. Get eBooks Website Thank You Open a DEMAT Account
  24. 24. Disclaimer: Kotak Securities Limited.Reg Off.: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E) Mumbai 400 05. CIN: U99999MH1994PLC134051, Tel No.:+22 43360000, Fax No.: +22 67132430. website:www.kotak.com. Correspondence Address: Infinity IT Park, Bldg. No. 21, Opp Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Tel no:66056825. SEBI Reg Nos: NSE INB/INF/INE230808130, BSE INB 010808153 / INF 011133230, OTC INB 200808136, MCXSX INE 260808130/INB260808135/INF 260808135, NSDL IN-DP-NSDL-23-97, CDSL IN- DP-CDSL-158-2001, AMFI ARN 0164. Compliance officer- Mr. Sandeep Chordia. (Telephone Number 022 6605 6825, Email idks.compliance@kotak.com). In case you require any clarification or have any concern, kindly write to us at below email ids: • For Trading Account related queries: service.securities@kotak.com • For Demat Account related queries:ks.demat@kotak.com. Alternatively, you may feel free to contact our customer service desk at our toll free numbers18002099191 or 1800222299. You may also call at30305757 by using your city STD code as a prefix. In case you wish to escalate your concern / query, please write to us at ks.escalation@kotak.com and if you feel you are still unheard, write to our customer service HOD atks.servicehead@kotak.com Investments in securities are subject to market risk; please read the SEBI prescribed Combined Risk Disclosure Document prior to investing The content/illustrations shared in the presentation is based on information available from the past budget(s)

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