Best investment strategy in shares market ahead of budget

The share market in India has been on the roll post-election and it remained bullish. Now is the time to look at your strategy as the Union Budget 2024-25 is going to be announced on July 23. Investors are looking for the right ways to negotiate upcoming market movements and tap into waves of developing opportunities. If you are also confused about how should you invest, where should you invest and what should be the right strategy to make your investment and maximise your returns.

Here are key strategies they need to keep in mind include:

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1. Diversification

Diversification is always a good approach in general and more so before the budget announcement. Spreading across different sectors, across different asset classes, and different market capitalizations helps to mitigate risks associated with sector or capitalization-specific volatilities. Add stocks, bonds, mutual funds, and maybe even commodities such as gold to balance your portfolio.

2. Sector-Specific Investments

Historically speaking, there have been some particular sectors that have always seen a much larger impact from budget announcements. Some of them are listed below:

Infrastructure and Construction: The government time and again declares to spend more on the development of infrastructure, which booms the companies working in the construction, cement, and allied sectors.
Renewable Energy: With Sustainable Development being the flavour of the season, there can be policies encouraging reliance on companies generating renewable energy powered by the Sun or the Wind in India.
Agriculture: With a substantial amount of money being placed on rural and agriculture development, agri-business, fertilizers, and rural finance stocks can look attractive.
Technology and Digitalisation: Depending on the further stress being placed on Digital India initiatives, capitally gaining might be the policy for the tech companies and the ones with digital infrastructure.

3. Invest in Blue-Chip Stocks

Blue-chip denotes these established companies that represent low volatility; they are generally more stable compared to the lesser-known and smaller companies. Investing in blue-chip, thus, always tends to act as a good cushion meant for your portfolio to ensure that it helps in maintaining its level of stability in case of any kind of market volatility that might be triggered by a budget announcement.

4. Invest in Banking and Financial Services

Some of the provisions in the budget, like deviating interest rates, policies on non-performing assets (NPA), and government borrowing programs, influence the banking and financial services sector. Positive policies within the budget can boost stocks of long-term banks and financial institutions.

5. Fiscal Deficit and Government Borrowing

Investors should keep an eye on the government’s fiscal deficit targets and borrowing plans. High fiscal deficits and increased borrowing can lead to inflationary pressures and higher interest rates, which may negatively impact interest-sensitive sectors like real estate and consumer goods. Conversely, prudent fiscal management can boost investor confidence and market sentiment.

6. Stay Informed and Flexible

One is consistently whipped with speculation and rumour through this period. Remain abreast through credible news sources and market analysis. Flexibility is key: be prepared to change or alter your investment strategy given new information and changing market conditions.

7. Look at Defensive Stocks

Defensive stocks, usually those from the consumer staples and healthcare sectors, have performances considered stable regardless of what the economic condition is. By including these in your portfolio, you would easily hedge the erratic market volatility if any, after the budget announcements.

8. Check the Tax Impact

The budget can bring amendments in tax policies and that will have an effect on investment returns. Keep an eye on any such development regarding capital gain tax or dividend distribution tax and other relevant taxes. Accordingly, strategize tax-efficient investment through tax-saving instruments and funds to optimize returns.

9. Long-Term Perspective

Although the budget sometimes has the effect of causing movements in the market on a short-term basis, a focus on the long term is the most important thing. Thoroughly research the underlying fundamentals regarding your investments to prevent any fickle movements in the financial markets.

10. Consult the Financial Advisors

In case of any doubt, one can also consult a financial advisor or the leading experts in the market. It shall be a personalized recommendation towards the goal of an individual, their risk-bearing capacity, and the market scenario.

With all these strategies in place, investors can place their Indian stock portfolio with a better stance against the plunged interests and mysteries around the Union Budget of 2024-2025.