The Union Budget emphasised the government's efforts to accelerate growth, promote inclusive development, boost investments in the private sector, raise household sentiments, and increase the spending power of India's rising middle class. One of the most impactful announcements was exempting individuals earning up to Rs 12 lakh annually from the earlier annual income limit of Rs 7 lakh from paying income tax under the New Tax Regime the default tax regime.
This change comes at a crucial time when consumption growth has been subdued. By leaving a larger portion of the population with higher disposable income, the move is expected to stimulate households not only to spend but also to invest.
In turn, it could reflect positively on the stock prices of firms engaged in these industries with demand and revenues potentially picking up. With greater disposable income and financial flexibility the middle class, in particular, may choose to allocate the additional funds into equity markets - either through lump sum investments or Systematic Investment Plans SIPs.
And with the equities having displayed their wealth creation potential notwithstanding the risk involved, going forward as well household participation in the stock market through direct equity and mutual funds is expected to rise. The mutual fund industry has already been witnessing robust SIP inflows in recent years.
Even amid periods of intense volatility and market turbulence that marked CY, investors have largely remained committed to their contributions, with SIP inflows reaching a record high of Rs 26, crore in December Exempting annual income up to Rs 12 lakh as announced in the Union Budget could further accelerate this trend.
