What is the plan of the Modi 2.0 government to revive consumer spending in the economy? How will government revenues get a boost? Stock market investors will be searching for answers to these two key questions when Nirmala Sitharaman presents her Budget on Friday. The stock market is going into this Budget with muted expectations, experts say.

“Currently, Sensex and Nifty are like an optical illusion. They do not present a correct picture of the economic mood in the country,” said Rahul Arora, CEO, Institutional Equities, Nirmal Bang.

Arora is of the view that only 10-15 stocks are holding up the Sensex and the Nifty at their near life-time highs but the broader markets largely indicate investor sentiment to be at its nadir. The Sensex and the Nifty are trading at a price-to-earnings multiple of 29, which is a historically high level.

Around 30 stocks in the Nifty index are trading lower by around 30 per cent or more from their highs. The small- and mid-cap stocks have been trading at multi-year lows, and yet are not witnessing any buying interest.

Road map for growth revival

“There will be no trigger for the stock market from this Budget and no growth story if it lacks announcement to stimulate consumer spend,” said Rohit Srivastava, Fund Manager, Sharekhan by BNP Paribas.

Srivastava says the market is holding up at the current index levels on hope, and could see a sharp fall in the absence of policies that could set the road map for revival of growth.

Arora says that Sitharaman will have to project realistic fiscal numbers if she wants the market to react well or sentiments to remain positive. “She will have to project government revenues for the next fiscal that are believable to the market,” said Arora.

Sachchidanand Shukla, Chief Economist, M&M, is of the view that Budget 2019 will be a unique one as worries are more on the revenue side than expenditure this time. Shukla, who was a key speaker at BusinessLine’s pre-Budget event, said he did not see any miraculous announcements being made in the Budget, given the weak fiscal deficit and weak global scenario, and the government should give more time to the economy to heal after the disruptive policies of its previous term.

GST conundrum

The government has found it difficult to boost GST collections that are stuck at around ₹80,000 crore annually. The dilemma is that if the government tries to push up tax revenues, growth suffers. Private capital investment has not been forthcoming for years now due to low corporate earnings, and government capex now hinges on how it can boost its revenues, experts say. The Indian economy expanded at a five-year low of 6.8 per cent in 2018-19; fourth quarter growth has slumped to 5.8 per cent which is a 17-quarter low.