Indices trade flat, fiscal deficit target set at 5.1% of GDP for FY25

The domestic equity benchmarks traded near the flat line in early afternoon trade after the Budget for 2024-25 was laid down in the Parliament by the Finance Minister. The Nifty traded below the 21,750 mark.

At 12:28 IST, the barometer index, the S&P BSE Sensex, was up 17.44 points or 0.02% to 71,769.55. The Nifty 50 index shed 2.90 points or 0.01% to 21,722.80.

The broader market underperformed the headline indices. The S&P BSE Mid-Cap index declined 0.78%, and the S&P BSE Small-Cap index shed 0.51%.

The market breadth was negative. On the BSE, 1,664 shares rose and 2,042 shares fell. A total of 138 shares were unchanged.

Union Budget 2024:

In her budget announcement, Finance Minister Nirmala Sitharaman proposed to maintain the current tax rates for both direct and indirect taxes, including export duties, emphasizing consistency in taxation. The minister also highlighted that over the last decade, tax collections have more than doubled, indicating a significant increase in revenue generation for the government.

Additionally, while presenting the federal budget for the current fiscal year, she revised the fiscal deficit to 5.8% of gross domestic product, reflecting a slight adjustment from the previous estimate. Government data revealed that India`s fiscal deficit for the first nine months of the fiscal year through December amounted to Rs 9.82 lakh crore, which accounted for 55% of the annual estimates, emphasizing the need for careful fiscal management in the remaining period of the fiscal year.

The FY25 fiscal deficit target has been set at 5.1 percent of GDP, Sitharaman said. FY25 gross market borrowing pegged at Rs 14.13 lakh crore, net borrowing at Rs 11.75 lakh crore, she noted.

The Finance Minister announced a focus on encouraging states to undertake comprehensive development of iconic tourist centers and promote them on a global scale. This initiative aims to enhance the tourism sector and showcase India`s iconic destinations to a global audience, potentially boosting tourism and economic growth.

Sitharaman announced a significant surge in the capex outlook for the next year, reaching Rs 11.11 lakh crore, as well as plans for three major railway corridors: port connectivity, energy, mineral, and cement corridor, and high-traffic density corridor.

FM revealed the government`s plan to introduce a scheme aimed at assisting the middle class in rented houses, slums, chawls, or unauthorized colonies to acquire their own homes. She also highlighted the increased female enrollment in higher education and STEM courses, indicating a positive trend in female workforce participation. Additionally, the government is focused on promoting vaccination for girls aged 9-14 to prevent cervical cancer and has implemented initiatives such as making triple talaq illegal and providing housing under the PM Awas Yojana to enhance the dignity of women. Furthermore, the establishment of a corpus to provide long-term, low-interest financing is aimed at encouraging private sector research and innovation in sunrise domains.

The Finance Minister`s budget speech underscored the government`s dedication to inclusive development and growth, particularly prioritizing the needs of the marginalized segments, including the poor, farmers, youth, and women. Key initiatives highlighted in the speech aimed at empowering women included the prohibition of triple talaq, providing legislative reservation, and offering housing support through the Awas Yojana in rural areas.

Additionally, the government extended substantial support to women entrepreneurs by disbursing 34 crore loans through the Mudra Yojana. Furthermore, the minister emphasized the government`s focus on "GDP" (governance, development, and performance) ahead of the upcoming general election, highlighting India`s robust real GDP growth rate of 7.7% between April and September 2023, which is the highest among major global economies.

Economy:

The seasonally adjusted HSBC India Manufacturing Purchasing Managers� Index (PMI) recovered from an 18-month low of 54.9 in December to 56.5 in January. The latest reading highlighted the strongest improvement in the health of the sector since last September.

Meanwhile, Goods and Services Tax collections jumped 10.4% to over Rs 1.72 lakh crore in January, reflecting buoyant economic activity and setting the stage for the next phase of GST reforms. This is the second-highest monthly collection ever and marks the third month in this financial year with a collection of Rs 1.70 lakh crore or more, a finance ministry statement said on Wednesday. "The gross GST revenue collected in the month of January 2024 is Rs 1,72,129 crore, which shows a 10.4% y-o-y growth over the revenue of Rs 1,55,922 crore collected in January 2023," the ministry said.

Derivatives:

The NSE`s India VIX, a gauge of the market`s expectation of volatility over the near term, tumbled 6.82% to 14.95. The Nifty 29 February 2024 futures were trading at 21,793.55, at a premium of 70.75 points as compared with the spot at 21,722.80.

The Nifty option chain for the 29 February 2024 expiry showed maximum Call OI of 37.6 lakh contracts at the 23,000 strike price. Maximum Put OI of 34.2 lakh contracts were seen at 21,000 strike price.

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