Union Budget 2024-25 got a thumbs up from most brokerages. However, there remained some apprehensions on the sweeping changes in the capital gains tax regime.

June quarter earnings season (Q1-FY25), progress of monsoon back home and the policy actions of the Reserve Bank of India (RBI) will also be some of the key developments that will attract the market’s eyes.

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Further globally, the developments related to the US presidential elections, geopolitical situation, crude oil prices are some of the factors that can sway market sentiment.

Morgan Stanley said that there are three big surprises. The first is the unique incentive scheme for job creation, second is the simplification of the tax code, including unification of TDS rates and capital gains tax rates and rationalisation of import duties, removal of angel tax, and a promise for further simplification by the next Budget.

And the third is the lower-than-expected fiscal deficit.

“The lack of populist spending is in line with expectation, although the increase in capital gains tax for equities is against our expectation of no change. We remain constructive on Indian equities, with a bias for large caps over small- and mid-caps. Overweight on financials, consumer discretionary, industrials and technology; underweight other sectors,” it said.

Goldman Sachs said the government ticked all crucial macro-prudential boxes. Revenue targets look broadly achievable and tax assumptions realistic.

“The budget promised a policy framework for long-term economic development to set the scope for the next generation of factor market (land, labour, capital and technology) reforms in conjunction with state governments,” it said.

“We remain positive on Indian equities given macro resilience and strong earnings delivery, which should keep its relative appeal intact despite elevated valuations.”

UBS said that the higher STT on derivatives transactions could lead to some near-term softness in the F&O segment. Lower individual tax burden in the new tax slabs could help support consumption (at the low-mid level).

Removal of indexation benefits while calculating capital gains taxation on non-financial assets (like real estate/gold) may help make financial assets more attractive and formalise savings, and in particular hurt the real estate sector, it added.

Another leading brokerage, Motilal Oswal, said the absence of the much-expected direct boost to consumption was a disappointment, increased focus on employment generation through skill development and marginally higher income in the hands of salaried class via adjustments in tax slabs in the new tax regime and higher limits for standard deduction may indirectly benefit consumption demand marginally.

“The combination of around 7% GDP growth and nearly 15% Nifty earnings CAGR in FY24-26, stable currency, moderating inflation, and buoyant retail participation may keep sentiments strong,” it added.