There are some publications that report on how the markets performed one week later, one month later, etc. after each budget. The stock market is considered the best indicator of how the Budget will perform.
Stock markets also rose on Budget day this year. Investors will see that the main indices rose 1.5 percent on February 1, 2022. However, the markets closed higher by 0.2 percent after the Budget speech. Experts praised the Budget for its boldness, pragmatism, and growth orientation. Providing long-term direction to the economy (India @ 100) is positive; the focus on capital expenditures and a strong sense of realism in the budget estimates are also positive. Disinvestment targets are capped at Rs 65,000 crore, fiscal deficit is capped at 6.4% of GDP, and tax targets are reasonable – these all give us comfort that many of the targets are within reach. The government and Registered Investment Advisors (RIAs) both benefit from transparency.
Managed portfolios
RIAs may have mixed feelings about the Budget when viewed from their perspective. Clients or investors have their entire portfolio managed by RIAs, and their asset allocation or financial planning ensures that they invest in asset classes other than equities alone. Moreover, there are additional funds waiting to be deployed, and a sharp rise in equity markets may augur well for investments already made, but disadvantageous for investments pending, even by the same investor.
Bond yields have risen to 6.85 percent (10-year) after reaching a low of 6.65 percent for the day, indicating the Budget disappointed. According to the differential, ten-year bonds lost 2 percent intraday and at least 1 percent compared to the previous day. Such losses are not restricted to the domestic market. Globally, inflation has been on the rise due to significant amounts of liquidity injected by Central Banks in the past two years to stimulate growth after the pandemic. A number of geopolitical issues, including the Russia-Ukraine conflict and drone attacks in the Middle East, have contributed to the spike in oil prices. RBI will have to worry about the impact of oil prices holding above $ 75 a barrel on inflation, specifically in India. Based on the high foreign exchange reserves India has, the RBI can make some quick decisions about monetary policy, and some announcements are imminent.
The Budget may have missed an opportunity by not encouraging individual investors to save for retirement. It was done for state government employees, so why not allow private sector employees to ask their companies to invest 14 percent (instead of 10 percent currently) of their salaries into NPS? Tax sops will certainly help RIAs in getting their investors to act despite all the information they provide.
Create own budget
An excellent time for individuals to think about their personal budgets is during the Union Budget. Consider your long-term goals, and invest with that time horizon in mind, taking your risk profile into account. Make sure you avoid risks and keep liquidity as the most important factor when setting short-term goals. A RIA can help you get on the safe path to meeting your goals if you want to avoid letting your emotions interfere with your decisions.