general budget Eagerly waiting for. The announcements made in the budget have a far-reaching and widespread impact on all sectors. The stock market is also no exception to this. However, a Morgan Stanley report says otherwise. According to global investment company Morgan Stanley, the impact of the Union Budget on the stock market is gradually waning. Market volatility increased in 2019 immediately after the budget and is expected to reach an 11-year high in 2022. Expectations as measured by pre-budget equity market performance are important in determining what the market does immediately after the budget.
market movements after 30 days of budget
Morgan Stanley said the market falls on two out of three occasions in the 30 days after the Budget. If the market has rallied in the 30 days before the budget, the probability of such a fall increases to 80 per cent. Only twice in 30 years has the market climbed both before and after the budget. While it is difficult to predict the post-Budget performance, one thing that seems more certain is that volatility will be higher on Budget day, even though this volatility has been declining over the last three decades, the report said.
More effect will be seen if this change happens
Increase in effective long-term capital gains tax on equity either to increase the holding period from 12 months to 2 or 3 years to qualify for long-term capital gains, or in the tax rate from 10 per cent, the report said. A 15 per cent rise can be a depressing especially for stocks in the broader market. Morgan Stanley expects the budget to gradually focus on reducing the fiscal deficit. Will pave a credible path for reduction in fiscal deficit in FY2024. Along with this, the Center will reiterate the medium-term road-map to reduce the government’s deficit to 4.5 percent of GDP. Will focus on continuing to support investment-driven growth with a boost to both public and private capital spending, and ease of living. We expect the focus of the budget to be on employment generation, improving access to infrastructure and availability of facilities, he added.
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