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Union Budget 2023-24: How budget impacts the stock market

Know here all about budget, how is the budget prepared and its impact on stock market.

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The Union Budget will be announced by the Union finance minister Nirmala Sitharaman on February 1. The Union Budget consists of a list of financial proposals, and estimates, and is generally referred to as the ‘Annual Financial Statement’ under Article 112 of the Constitution of India.

The budget is prepared annually, it is seen as the financial roadmap. It is prepared after months of gathering information from central and state ministries, authorities and departments. The upcoming budget is prepared by taking the previous year's budget into account. 

Departments involved with preparing the Union Budget

The departments that are involved in the making of the Union Budget are – Union Ministries; Financial Ministry departments like the Department of Economic Affairs, Department of Expenditure, Department of Revenue, Department of Investment and Public Asset Management (DIPAM) and Department of Financial Services; other Government Departments; Autonomous bodies; States and Union Territories, Tax Department; and other forces.

Read: Five major changes from February 1 that will impact you directly

How does the Budget impact stock markets?

The Union Budget plays a vital role in the country's economy, interest rates and stock markets. There is a long-term relationship between the budget and the stock market as its performance reflects the conditions of the economy. 

Normally, when the interest rates are high, then the capital cost of the industry which weighs down on the profitability will also rise. This will ultimately lead to a decrease in stock prices, and vice versa when the interest rates are low. A study suggests that long-term interest rates are negative for stock markets and short-term interest rates beings positivity to stocks. 

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