Markets could react initially positively to the Budget as a crucial event is out of the way and sectoral and stock-wise reactions could continue for a couple of days, said HDFC Securities in its research report.
It said that PSU stocks could perform even beyond that if the measures announced are prudent, credible and achievable. After 1-2 weeks, the markets could come back to its original trajectory reacting to the global risk appetite, interest rate trends, local micro and macro developments.
“We expect the trend of a diminishing budget impact on the market to continue. Since 2010, the Sensex has gone up seven times out of ten in the month after the budget (including the interim ones). But then, the benchmark index has also fallen eight out of ten times during the month prior to the budget. This time as we have not seen a significant correction ahead of the budget, chances of a big rise post budget seem limited”, the report added.
Speaking on the Union Budget 2019 themes, it said that GST collection growth, rural income growth and Insolvency code progress will play as three major themes to follow in 2019-20. Private consumption is expected to stay strong; 2019 monsoon could be a concern. Overall, there are fewer negatives from this budget. Possibilities of an unexpected large positive are also limited.
On the election results, the report added that the government could fund its election promises and maintain policy continuity (focus on agriculture, rural development, infra spending). Providing sources of funds to MSME could also gain attention in the Budget.