{"id":207,"date":"2020-01-28T12:07:31","date_gmt":"2020-01-28T12:07:31","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=207"},"modified":"2020-01-28T12:07:34","modified_gmt":"2020-01-28T12:07:34","slug":"how-budget-affects-the-stock-market","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/how-budget-affects-the-stock-market\/","title":{"rendered":"How Budget affects the Stock Market?"},"content":{"rendered":"
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The stock market is quite a\ndynamic and everchanging place. It tends to hover from one stance to another\ndepending upon the market and other hosts of factors. Budget is one of those\nfactors that tend to affect the stock market. And since the Union Budget is\nright around the corner, it\u2019s time we look into this.<\/p>\n\n\n\n

The budget tends to create quite a\nlasting effect in the form of fluctuations in the stock price, the change in\nthe market stance and much more. We here look into how the budget affects the\nstock market and tends to create a fluctuation in the stock prices around. <\/p>\n\n\n\n

The Synopsis on Budget and its aftermath<\/h3>\n\n\n\n

Even if you are stationed anywhere\nin the nation, from the very east to the west or the south to the north, budget\nis something that you\u2019d surely hear about. Budget, as we know, is the\nestimation of the expenses and revenue for the specified future period of the\nnation. The central government forms the budget and announces it.<\/p>\n\n\n\n

The budget tends to bring forth a change\nin the taxation and economic policies of the nation. This creates a domino\neffect on the market and the economy of the nation. That, in turn, creates a\nseismic shift in the stock market. It\u2019s not uncommon to see the market drop a\nfew points or gain quite a historic height on the very aftermath of the budget\nannouncement. <\/p>\n\n\n\n

How the budget affects the stock market? <\/h2>\n\n\n\n

Here\u2019s how the budget tends to\naffect the stock market. <\/p>\n\n\n\n

Increase in exemption limit for taxpayers\nand its impact <\/h3>\n\n\n\n

Every year and now with the\nbudget, the news of the change in income tax exemption slab comes forth.\nWhenever the exemption limit is increased for say, this provides the taxpayers\nquite a benefit. They can save the amount that would have been paid as taxes. With\nincreased savings levels, a person can finally realize their dream to fulfil\ntheir financial goals by investing in the stock market and generating greater\ncorpus. And when people start investing in the market, the share market tends\nto be on the positive side and heads towards the bullish side. <\/p>\n\n\n\n

Change in corporate tax and its impact<\/h3>\n\n\n\n

Corporate tax is a duty paid by\nthe company falling under the specified purview of revenue as mentioned under\nthe Income Tax Act, 1961 and the Finance Rules. As is the case of the change in\ntaxation limit, the government also tends to change the corporate tax rates\nwith every budget announcement. This tends to increase or decrease the burden\non the company depending on whether the tax rate is increased or decreased. If\nthe rate is decreased, the burden decreases on the company and their profit\nmargins will increase. They can then utilize that extra bit of funds for\nexpansion and growth that will help to increase the company\u2019s market value and\nswell their share prices.<\/p>\n\n\n\n

Stance on LTCG and its effect in the stock\nmarket<\/h3>\n\n\n\n

With every budget announcement,\nthere is news doing the rounds about the long term capital gain on equities and\nmore. For say, there are whispers about the increment in the holding period for\nthe stock so as to qualify for a long term capital asset or removing the long\nterm capital gain completely. A person\u2019s tax liability is determined on the\nbasis of whether it\u2019s a short term or long term investment. The rates for short\nterm and long term capital gains are different and if long term capital gain is\nremoved then the taxation liability will decrease down. That will increase the\nreturn margins for the people and will entice them to invest further in the\nmarket. <\/p>\n\n\n\n

Taxation on Buyback of Shares <\/h3>\n\n\n\n

Budget brings forth plenty of new\nchanges and during recent years taxation on buyback shares was one such thing.\nThis step saw the levy of 20% tax on the buyback of the shares which means that\nthe investors will receive lesser payout than what was intended. This may put\nsome investors at the backfoot when it comes to investing in the market as\ntaxation liability will decrease their net return. <\/p>\n\n\n\n

Sector-wise hit and their impact on the stock\nmarket<\/h3>\n\n\n\n

The budget announces different\nsector-related policies or rules every year. These sets of new policies tend to\naffect those sectors be it positively or negatively. If such an announcement is\nin favour of the industry or the sector, the sector will see a spurt of growth\nand will tend to perform well, which will then relate to the increase in stock\nprices of them. People will gear to invest in them sensing the growth.\nSimilarly, if the announcement is on the stringent side, then the sector will\ntake a hit and with that their stock prices plummet. That will make them a less\nlucrative deal to go for. <\/p>\n\n\n\n

Final Words:<\/h2>\n\n\n\n

As an investor or a potential\ninvestor, this period of the pre-budget announcement is quite intense. You\nnever know what will be in the store for you and that often keeps you in the\ndark about whether to go for the investment or not. As an existing investor, it\nis advised to keep a watch at the pre-budget predictions and look forward to\nthe budget as that will showcase a clearer picture of your existing portfolio\nand potential investments that you will make further. If you\u2019re a newbie investor\nthen you can wait for the budget announcement to see how the market behaves and\nthen make the right decisions. But for long term investors, the theme remains the\nsame as budget announcements are merely one announcement coming in every year\nand you are in for the long run. For long term investors budget doesn\u2019t tend to\naffect much in their investment plans as their investment value will continue\nto grow along with time.  <\/p>\n

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The stock market is quite a dynamic and everchanging place. It tends to hover from one stance to another depending upon the market and other […] Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":209,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[39],"class_list":["post-207","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-market","tag-budget"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/207","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=207"}],"version-history":[{"count":2,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/207\/revisions"}],"predecessor-version":[{"id":225,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/207\/revisions\/225"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/209"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=207"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=207"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=207"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}