Budget 2024: Local Funds Turn Cautious But Global Peers Bullish On Key Themes

Domestic funds are cautious as they book profit ahead of the Union Budget after pumping in liquidity that propelled India's equity benchmarks, the Nifty and the Sensex, to hit fresh highs.

This comes while their global peers have been on a buying spree in key budget themes like capital goods, auto, and auto ancillaries. So far this month, overseas investors have bought stocks worth Rs 33,973 crore, according to the data from National Securities Depository Limited or NSDL.

In the week going ahead into the budget, foreign funds have bought equities worth nearly Rs 11,000 crore while domestic institutions have sold stocks worth Rs 4,200 crore, according to provisional NSE data.

Global investors have prioritized capital goods, automobiles and auto components, and information technology as their top investment sectors ahead of the budget. FIIs have bought investors worth Rs 3,612 crore in capital goods stocks, while investing Rs 2,993 crore in automobiles and related companies.

Finance Minister Nirmala Sitharaman will announce the much-awaited measures on Tuesday, the first time since BJP-led NDA formed a government at the centre for the third consecutive term. 

As India’s Finance Minister unveils the Union Budget, all eyes will be on key sectors and themes like infrastructure, consumption, and public sector companies.

A notable trend was the lack of buying in financial services, which partly explains the poor performance of financial services in July so far, according to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. "If the recent trend of weak dollar and bond yields persists, FPIs are likely to continue their buying in the market."

Domestic and foreign investors are keenly watching for possible tweaks in the long term capital gains tax in the Budget to be presented on July 23, Vijayakumar said.

This comes while India’s equity gauge — NSE Nifty 50 — is looking to surpass the key psychological barrier of 25,000, having hit fresh life highs over 40 times so far this year. The 30-stock S&P BSE Sensex has surged about 12% this year, making it the sixth-best index among its Asian peers.