Indian stock indices surged at the beginning of Friday’s session, responding positively to the central government’s commitment to fiscal consolidation despite looming General elections. Favorable cues from other Asian markets also provided support. At the opening bell, the Sensex stood at 72,189.10 points, up 543.80 points (0.76%), while the Nifty reached 21,867.95 points, marking a gain of 170.50 points (0.79%). Among the Nifty 50 companies, 42 advanced, and 8 declined, with all widely-tracked Nifty sectoral indices, except Nifty auto, showing gains.
The government set the fiscal deficit target for 2024-25 at 5.1% of GDP, following a downward revision of the 2023-24 fiscal deficit target from 5.9% to 5.8%. There is a plan to bring the fiscal deficit below 4.5% of GDP by the financial year 2025-26. Finance Minister Nirmala Sitharaman affirmed the government’s commitment to meeting the fiscal consolidation path outlined in 2021-22.
Fitch Ratings noted that the government’s revision of the fiscal deficit for the current fiscal year to 5.8% demonstrates a determined effort to adhere to a gradual fiscal consolidation path during an election year. Importantly, the central government did not introduce any additional tax burden, providing relief to citizens and contributing to positive sentiment among domestic investors.
The interim budget, presented on Thursday, will address financial needs until a new government is formed after the Lok Sabha polls. A full budget is expected to be presented by the new government in July. On Budget Day, the Indian stock indices experienced fluctuations, initially starting in the green but settling marginally in the red by the end of the day. Analysts attributed this fluctuation to factors such as lower-than-expected capital expenditure markup and the US Fed’s unclear guidance on monetary policy. Some also noted mild profit booking as a potential contributing factor.