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The Interim Budget 2024, presented by Finance Minister Nirmala Sitharaman, has set the stage for a dynamic economic landscape with a focus on inclusive empowerment, sustainable development, and fiscal prudence. As investors navigate the post-budget market, the impact on both listed and unlisted companies’ shares is multifaceted, and influenced by various factors.

Listed Companies:

  • Market Sentiment and Sectoral Performance:

The Nifty Infrastructure Index surged by 3.4%, reflecting optimism about increased government spending in the sector. Similarly, the Nifty Energy Index, including renewable energy companies, rose by 2.7%, indicating positive sentiment towards clean energy initiatives. The Nifty Bank Index experienced a modest 0.8% rise, suggesting cautious optimism about potential measures in the full budget to stimulate economic activity.

  • Tax Reforms and Sectoral Considerations:

No major income tax announcements in the interim budget-maintained stability. However, tax benefits extended to startups and specific IFSC units until March 2025 are noteworthy. Banking and Financial Services are poised for growth, thanks to careful financial management, reduced deficit, and new investment areas like housing and renewable energy.

  • Infrastructure and Logistics:

The budget’s focus on capital expenditure towards vital infrastructure sectors and the PM GatiShakti initiative indicate substantial growth opportunities. This strategic investment is expected to benefit companies in construction, engineering, and logistics.

  • Metals & Mining:

Increased capital expenditures and government initiatives focusing on boosting steel demand bode well for the Metals and Mining sector. Initiatives like river interlinking and the Jal Jeevan Mission are set to drive demand for metals, benefitting steel producers and pipe companies.

  • Energy Sector:

The energy sector’s outlook is neutral, with an emphasis on sustainable development. Initiatives like coal gasification and support for the electric vehicle ecosystem suggest a pivot towards cleaner energy sources, creating opportunities for investments in renewable energy and related infrastructure.

Unlisted Companies:

  • Investor Sentiment and Valuation Effects:

While unlisted companies don’t directly trade on stock exchanges, positive market signals and comparable listed company performances can influence investor sentiment. The budget’s impact on exit opportunities, regulatory changes like long-term capital gains tax on unlisted shares, and ESOP taxation can indirectly shape the unlisted market.

  • Regulatory Changes and Economic Climate:

Potential regulatory changes in the full budget, such as parity in LTCG tax treatment for listed and unlisted shares, can impact the attractiveness of investing in unlisted shares. The overall economic climate, driven by government spending and interest rate movements, can indirectly affect the valuation and investment attractiveness of unlisted companies.

  • Deal Flow and Valuations:

While the budget might not directly impact deal flow in the unlisted space, the broader economic sentiment it generates can influence merger and acquisition activity involving unlisted companies. The budget’s impact on listed companies in the same sector might indirectly affect valuation benchmarks used for unlisted companies.

Key Takeaways:

  • The interim budget offered positive signals for specific sectors, but the overall market reaction was cautiously optimistic.
  • Volatility remained stable, indicating a measured response from investors.
  • The full budget in July is expected to have a more pronounced impact on the stock market, with experts emphasising its significance.

In conclusion, the budget’s impact on both listed and unlisted companies is intricately connected to market sentiment, sectoral dynamics, and regulatory changes. Investors are advised to consider broader economic factors and expert opinions alongside the budget when making investment decisions. As the full budget unfolds in July, the market is likely to witness more substantial shifts, providing clearer guidance for investors in the dynamic landscape of 2024.

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