With Finance Minister Nirmala Sitharaman set to present the 2024 Union Budget in the Monsoon Session of Parliament on July 24, let’s analyse how markets are likely to react before and after the budget presentation.

In the 2024 Interim Budget, the government highlighted how it will pave the way for ‘Viksit Bharat by 2047’. And in the upcoming budget, Nirmala Sitharaman is expected to unveil a comprehensive roadmap.

According to American multinational company Morgan Stanley, the finance minister will likely keep the fiscal deficit target at 5.1% of GDP for FY2025, aiming for 4.5% by FY2026.

Morgan Stanley also noted that the stock market usually drops two out of three times in the 30 days after the budget, with an 80% chance of a fall if the market was up in the 30 days before. The market saw an uptick before and after the budget only twice in the past three decades.

Morgan Stanley suggest investors watch these three things:

1)Fiscal Consolidation: Any changes to the fiscal deficit target can affect the market. A deficit below 5% might be concerning.

2)Infrastructure: More spending on infrastructure can help consumer and industrial stocks. Morgan Stanley likes these sectors.

3)Sector-wise Investment: The market might react to the lack of major tax cuts, so sector-specific spending is important. Morgan Stanley prefers Financials, Consumer Discretionary, Industrials, and Technology sectors.