Budget 2023 Expectations: 3 market experts share what they expect and what investors should do

The Union Budget 2023–24 will be presented in the Parliament by Finance Minister Nirmala Sitharaman on February 1. This is the last full Budget before the general elections in 2024. 

With the government implementing the majority of the reforms outside the ambit of the Budget, the impact of the Union Budget on the equities market has significantly decreased over the last few years. However, market participants still see it as a crucial trigger for movements in shares. 

Here's what some industry experts are expecting from the Budget:

Avinash Ramesh Godkhindi, Managing Director and CEO, Zaggle

Fintech has now evolved into one of the fastest-growing segments of technology, transforming the way financial services are developed and the Fintech market is expected to reach ₹9.2 billion at a compound annual growth rate (CAGR) of 24.96 percent between 2022 and 2027. Hence, there are high hopes for the government to unveil policies and initiatives that will further support and encourage the growth of this sector.

The Union Budget 2023-24 has assumed critical importance because it comes at a time when India needs to cement its place as an outlier in the global economy. One way to achieve that is to promote digital payments and encourage companies to adopt digital transactions across the economic diaspora. The adaptation of technology integrated services in business-to-business (B2B) transactions will not only bring ease in doing business but will also reduce costs and increase financial independency. The government must encourage investments in automation in spend management to enable cross audits and ensure suitable and high compliance with corporate spend regulations.

Data breaches, malware injection, account hacking, data loss, and cloud service misuse are just a few of the significant security threats. Indian consumers need to be educated to utilise digital payments securely. A large section of Indian companies does not have a system to detect frauds as expenses are mapped manually. We expect the emphasis on data security to increase in the upcoming Budget, and the government should announce measures to increase digital vigilance and safety.

Aniruddha Sarkar, Chief Investment Officer, Quest Investment Advisors

Being the last full Budget before elections in 2024, the government would be on the front foot on reforms and pushing for growth in the economy across sectors. The Budget would have a two-pronged focus.

I) Firstly, it would be on increasing household income for the middle-class and lower-income groups

II) Secondly, it would be to take India into the next stage of growth into becoming a $5 trillion economy over the next 4-5 years.

From an equity investor's perspective, we think a major thing to lookout for would be changes to the long-term capital gains (LTCG) tax rate or tenure of holding for equity. Either of the two could be altered to bring more parity with taxation of other asset classes.

While promoting the startup ecosystem further, we could see some tax benefits for the unlisted equities for the PEs and VCs in the country.

Overall, the Budget will have a positive tone to it and be more growth-focused and less socialistic.

Vinay Jain, Portfolio Manager, Karma Capital

The country over the last few years has been witnessing a transition towards an economic stronghold stimulated by the national infrastructure pipeline comprising key initiatives like ‘housing for all’, smart cities, ‘Bharatmala’, ‘Sagarmala’, ‘Udaan’ (airports), freight corridors, high-speed rail and metro rail, among others. We could expect continued focus on infrastructure development to provide impetus on economic growth. The broader focus on the Budget would be to promote growth and emphasis on local manufacturing and exports.

India, being largely a domestically driven economy, should cushion the impact of any recession seen in the developed economies. The discretionary spending by the Indian consumer coupled with the various government initiatives towards infrastructure and reform activities should drive the growth of the economy. We see domestic-focused sectors to perform relatively better than those having global exposure.

Hence, we at Karma Capital, expect banks, industrials, infrastructure, logistic, manufacturing and consumption driven companies and sectors to do well in the medium to long term.

We would advise retail investors to not blindly follow investments made by others without doing their homework. Every individual is different in terms of financial goals and risk appetite. Therefore, what may work for others, may not work for you.

Hence, we would advise retail investors to inculcate this habit of penning down key catalysts or growth drivers for the company and then monitor these developments. This way one would improve and get better in analysing companies across various sectors. We would also urge retail investors to analyse their financial position and objectives before taking a call on any investment. Logic coupled with patience and discipline can help one keep herd mentality at bay.