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On 1st February 2025, Finance Minister Nirmala Sitharaman presented the Union Budget 2025, which triggered a mixed response in the Indian stock market. While the benchmark indices witnessed a slight decline, certain sectors, particularly those linked to consumption, saw significant gains. The budget’s focus on reviving consumption, boosting capital expenditure, and introducing sector-specific measures played a key role in shaping market sentiment.
Benchmark Indices See a Dip
The benchmark indices, BSE Sensex and Nifty 50, experienced a marginal decline following the budget announcement. The Nifty 50 fell by 0.56% to close at 23,372.35 points, while the BSE Sensex dropped by 0.56% to 77,069.85 points. This decline was attributed to cautious investor sentiment, as the budget lacked major surprises but focused on fiscal consolidation and targeted reforms.
Consumption-Linked Sectors Shine
Despite the overall downturn, consumption-linked sectors emerged as the biggest winners. The Fast-Moving Consumer Goods (FMCG) sector rose by 3.1%, driven by the government’s announcement of personal income tax cuts. These tax cuts are expected to increase disposable income, thereby boosting consumer spending in Asia’s third-largest economy.
The automotive sector also witnessed a 2.1% increase, as the budget introduced measures to promote electric vehicles (EVs) and enhance infrastructure for the automobile industry. Analysts believe that these initiatives will drive demand for vehicles and support the sector’s growth in the coming years.
Positive Momentum in Insurance and Infrastructure Sectors
The insurance sector gained traction following the announcement of an increase in the Foreign Direct Investment (FDI) limit to 100%. This move is expected to attract more foreign capital into the sector, fostering growth and innovation. Shares of major insurance companies saw a notable uptick post the budget announcement.
Similarly, companies in the fertiliser and infrastructure sectors reported gains due to favourable government measures. The budget allocated significant funds for infrastructure development, including roads, railways, and green energy projects. This focus on infrastructure is expected to create long-term growth opportunities for companies in these sectors.
Market Experts Weigh In
Gaurav Dua, Vice President of Mirae Asset Sharekhan, commented, “The budget met market expectations by focusing on reviving consumption and capital expenditure. The emphasis on infrastructure and consumption-linked sectors is a positive step towards sustaining economic growth.”
Other market experts echoed similar sentiments, highlighting that while the budget lacked big-bang reforms, its focus on fiscal prudence and targeted measures was well-received. The government’s commitment to reducing the fiscal deficit and boosting capital expenditure was seen as a positive signal for long-term economic stability.
Sectoral Movements at a Glance
- FMCG: +3.1% (boosted by income tax cuts and higher disposable income)
- Automotive: +2.1% (driven by EV promotion and infrastructure development)
- Insurance: Positive momentum (due to FDI limit increase to 100%)
- Fertiliser and Infrastructure: Gains (supported by increased government spending)
The Union Budget 2025 elicited a mixed response from the Indian stock market, with benchmark indices experiencing a slight decline while consumption-linked sectors saw significant gains. The budget’s focus on reviving consumption, boosting infrastructure, and introducing sector-specific measures has set the stage for sustainable economic growth. While the market’s initial reaction was cautious, the long-term impact of these measures is expected to be positive, driving growth across key sectors and strengthening India’s economic fundamentals.
