Here's how stock markets are likely to react before and after Union Budget 2024

According to a report by the Hindustan Times, Union Finance Minister Nirmala Sitharaman, during the interim Budget presentation on February 1, emphasized on ‘Viksit Bharat by 2047’ — a detailed roadmap of which is expected to be unveiled in the full budget.

American multinational brokerage firm Morgan Stanley said that the finance minister is likely to retain the central government’s fiscal deficit target at 5.1 percent of GDP (Gross Domestic Product) in FY25, while being on track to attain the target of 4.5 percent of GDP by FY26.

The stock market falls on two of three occasions in the 30 days after the budget, said the brokerage company, adding that probability of a fall rises to 80 percent if the market has risen in the 30 days preceding the budget.

The analysis showed that the Indian stock market has been up both pre and post the budget only twice in 30 years.

Morgan Stanley said any deviation from the fiscal deficit target can influence the stock market, noting that a contraction in the fiscal deficit below 5 percent may not make the stock market happy.

As per the brokerage firm, more spending on physical and social infrastructure can also impact the stock market.

If the central government spends more on rural and infrastructure spending, consumer discretionary and industrial stocks will likely fare better, said the brokerage company, adding that it remains overweight on all three sectors.

According to Morgan Stanley, the stock market could be surprised by the lack of major tax cuts or redistribution spends owing to which specific sectoral incentives and spending will be crucial.

Among sectors, the New York-headquartered brokerage firm remains overweight on Financials, Consumer Discretionary, Industrials and Technology.