Despite attempts by the Finance Minister to quell expectations from this interim budget, both the stock markets and India Inc were primed for some big-ticket announcements, having put out elaborate wish-lists. The Budget speech had none. The FM stuck to the script by mainly recounting the achievements of the NDA government over the last 10 years, with a few forwarding looking statements.

This seems to be why the Nifty50, which began the Budget session on a slightly upbeat note, at about 21790 levels, lost ground to 21720 by the time the FM wrapped up her 60-minute speech. There was nothing really disappointing about the speech. In fact, its sub-text was that the ruling regime is fairly confident of winning a third term.

Apart from refraining on big-bang announcements on corporate or personal taxes, the Budget perhaps negatively surprised the stock market by sticking to non-populist, conservative spending targets, that have been the norm with the NDA.

Wild expectations of an encore on capital outlays didn’t come good. Capital outlays for FY25 have been budgeted at Rs 11.11 lakh crore, a 11.1 per cent increase over last year’s Budget estimate of Rs 10 lakh crore, the growth rate considerably lower than 30 per cent last year. In fact, the total expenditure budgeted for FY25 at Rs 47.65 lakh crore is just 6 per cent higher than the FY24 revised estimates of Rs 44.9 lakh crore, indicative of a government that is in belt-tightening mode.

The lower-than-expected fiscal deficit target of 5.1 per cent for FY25 and the conservative borrowing programme of Rs 14.13 lakh crore also reiterate that the Centre is preparing to wind down its post-Covid spending stimulus and hand over the baton to the private sector. Whether this cools the market ardour for PSUs, defence and railway stocks which have been rocketing on the capex theme remains to be seen. The markets will need to wait to see sector-specific outlays before reacting to this.

Promises of a new housing scheme for the middle class (will it be one the lines of the erstwhile Credit Linked Subsidy Scheme?), projects to promote tourism, adoption of e-buses, implementation of three new railway corridors for minerals, energy and cement, coal gasification, biogas blending, etc, hold out hope for a new set of stocks to turn the flavour of the market.

While the Budget speech was a bit of a damp squib for stocks markets, it was a cheery one for bond markets. With the Centre’s fiscal deficit target for FY25 at 5.1 per cent undershooting market expectations for 5.3-5.4 per cent, the gross borrowings of Rs 14.1 lakh crore considerably less than the expected Rs 15 lakh crore, the government has sent out the signal that it will not stand in the way of a further rally in bonds (or a fall in market yields). The 10-year government bond, which began the speech at levels of 7.17 per cent had sunk to 7.06 per cent on the conclusion of the speech. With the JP Morgan Index Inclusion imminent in June, and new foreign investors lining up to buy Indian government bonds, there’s enough fuel in this budget to sustain the bond rally. Savers and fixed income investors though may need to lock into high rates on longer term deposits and bonds, while the going is good.

However, Budget fine print has been known to throw up surprises and investors should wait for a careful reading of it before taking any material decisions.