Expert Analysis of the Global Macro Events & News affecting the Indian Markets – 30 Jan 2024

February 1, 2024 – The date when every Indian– from the chai wale bhaiya to an upper-middle-class businessman–  sticks to their TV screen to witness the Finance Minister unveil the Budget of the year. The budget is not just a PDF document stored in one file on a Tablet that the honorable finance minister carries, but an attestation of what the government has done in the past and what it plans to do further. Just like every year, the incumbent government of India will drop its Interim Budget bombshell. 

Seemingly not on the brink of political transitions, India braces itself for the unveiling of the interim budget on February 1, 2024—a pivotal fiscal juncture amid the looming general elections. The BJP government has been in power since 2014 and this will be the 10th budget that the incumbent government will be presenting. 

Distinguished by its “vote on account” status, this budget assumes the role of a financial steward, steering the economic ship through the interim period until the incoming government takes charge. To put it simply, Vote on Account refers to a special provision that allows the government to obtain the necessary funds to meet its expenditure for a limited period. This year’s budget will only cover immediate and necessary expenditures.

In this newsletter, we’ll try our best to cover the ins and outs of the budget. We’ll start our discussion with a brief look at sectors that have been the Modi government’s focus during its 10-year reign and slowy move towards what we anticipate this year. Before that, let’s have a look at an important parameter for market vigilantes i.e., the performance of indices pre and post-budget. 

Budget is synonymous with market volatility. As per data since 2013, the Indian market (Nifty) has moved less than 1 percent on the Budget day in just four of the past 10 sessions. Have a look at the chart given below. The budget for 2021-22 was the one that had the highest positive movement on Budget Day as well as post-budget. While many of us might think that the budget has a huge impact on stock market indices, the truth is that it has never been less and it’s diminishing each passing year. The impact is short-lived with markets recovering sooner or later if the budget fails to impress the investors. 

Source- Economic Times

Let’s have a look at the important sectors that have been the BJP government’s focus recently and also how these sectors performed.

Infrastructure tops our list. The BJP government has consistently prioritized infrastructure development, including the construction of roads, highways, railways, and airports. The “Bharatmala” and “Sagarmala” projects were launched to improve road and port connectivity across the country. While the former aims for road connectivity across the country, the Sagarmala Project aims for the development of modernized ports across the coastline.  

Delhi-Mumbai Expressway, Vande Bharat Railways, Delhi-Katra Expressway, Chenab Bridge, etc. are a few projects that have been completed. In fact, India has nearly 64 lakh km of total road network, which is the second largest in the world. India’s National Highways network alone stood at 1,45,240 km today compared to 91,287 km in 2013-14. 

Source- Fortune India

Solving India’s Big Energy Crisis with Renewables: We are the third largest consumer of energy in the world. This means that a huge chunk of our resources go into the sector. This also means that energy as a sector is constantly under scrutiny. Since India imports most of the fossil fuels it consumes, energy comes for us at a high cost. Now, with renewable energy at hand, the country is trying to solve the energy crisis. 

So, it’s no surprise that Union Budget 2023-34 had Green Growth as one of the seven focus sectors – Saptarishi. INR 35,000 Crore was allocated for the sector last year. Currently, our installed renewable capacity stands at 179.5 GW, but the country plans to achieve 500 GW capacity by 2030. This points toward high expectations for big allocations to the renewables sector. Have a look at how much of installed capacity is being added every year here: 

Taking the Startup ecosystem to new heights- To foster innovation and entrepreneurship, the government launched the “Startup India” initiative, which includes various incentives and support mechanisms for startups.

To boost the Startup ecosystem in India, Shri Piyush Goyal, launched the Startup India Seed Fund Scheme on 19th April 2021. According to a report, over 1,000 startups were selected by approved incubators under the Startup India Seed Fund Scheme (SISFS) to provide cumulative financial support of INR 177 Cr as of April 30, 2023. For the uninitiated, the SISFS was notified in 2021 for four years with a corpus of INR 945 Cr. The minister also said that the number of recognized startups in the country grew to 98,119 as of April 30, 2023, from 428 in 2016.

The chart below shows the growth of unicorns in India in the last 10 years. FYI, A unicorn is a company that has a valuation of 1 Billion Dollars. 

Source- ET Tech

India’s Tightening Security- In recent years, the Indian government has demonstrated a heightened commitment to bolstering its defense sector, driven by the imperative of ensuring national security and modernizing the armed forces. Increased budgetary allocations, a renewed emphasis on indigenous defense manufacturing through the “Make in India” initiative, and a series of strategic defense agreements with key global partners have underscored this commitment. The exports have reached an all-time high of approx—Rs 16,000 crore. It is almost Rs 3,000 crore more than the previous financial year. There has been a rise of over ten times since 2016-17. 

Source: PIB Delhi, 1 Apr 2023

Last year’s budget with its theme of Vasudhaiva Kutumbakam and priorities set to the Saptarishi had significant changes and allocations to drive economic growth. This year, however, we are not expecting any surprises or major announcements as this budget will only cater majorly to get the current government through the Lok Sabha elections in May. Let’s see what’s on the table (in the bag) for 2024-25. 

Market Moments With Divam Sharma

Last Saturday, your Fund Manager Divam Sharma did a live where we discussed:

• Current Market Events
• Budget Expectations
• Market Outlook, and more. 

Stay tuned to our YouTube channel for more on budget as we do a live post the budget has been announced this Friday, 2nd February 2023. 

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Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use.