When the Indian government unveiled Budget 2025–26 on 1 February 2025, its twin aims were clear: boost consumption and maintain fiscal discipline. These decisions directly influenced equity markets, pushing sectors in different directions and creating swings that traders and investors keenly watched.
1. Tax relief sparks consumption surge
One of the most talked-about changes was the hike in the income tax exemption threshold to ₹12 lakh (₹12.75 lakh including standard deduction), up from ₹7 lakh earlier. This translates into more disposable income for millions and sparked an early rally in consumer-oriented stocks:
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FMCG, auto, and real estate sectors surged as household spending outlook brightened.
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Stocks like Maruti Suzuki, Godrej, and ITC posted noticeable gains .
Though the budget 2025 on stock market was volatile, the trend signified renewed optimism around consumer demand.
2. Conservative capital expenditure = mixed response
The government proposed a capital outlay of ₹11.21 trillion—only a modest rise from the previous year (₹10.18 trillion) . This cautious stance had mixed market consequences:
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Infrastructure and engineering names like L&T, UltraTech, and IRB Infra dropped on investor disappointment.
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The infrastructure index declined, underlining the market’s preference for bolder capital spending.
3. Volatility around Budget day
As usual, exchanges witnessed heightened swings:
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Sensex hovered around flat, closing with marginal gain of ~5 points, while Nifty 50 ended ~26 points lower.
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Intra-day touched both gains and losses as investors absorbed announcements linked to tax cuts and capex.
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Small-cap/mid-cap indices also swung, reflecting uncertainty .
Historically, markets tend to dip just before and shortly after the budget announcement, then stabilize as clarity emerges.
4. Sector-wise impact breakdown
Here’s how key areas performed:
Consumer-linked sectors (FMCG, auto, realty)
Benefited most from increased personal spending capacity, with indices up 2–3%
Insurance
Although FDI limit was raised to 100%, demand for tax-saving insurance took a hit due to higher exemption limits
Infrastructure & cement
These lagged behind, reflecting concerns over modest capital outlay
Defence & railways
Mixed sentiment prevailed—promising policy support but overshadowed by capex caution
Energy & metals
Also downbeat, weighed by subdued infrastructure push
5. Macro-market context
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The fiscal deficit target was set at 4.4% of GDP (down from 4.8%) Government plans for ~₹14.82 trillion in borrowings could keep bond yields elevated.
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While long-term posture showed fiscal prudence, short-term market reaction remained edgy.
6. Investor sentiment and outlook
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Some experts noted volatile conditions, with scope for gains but caution advised—“right stock picking will be key”.
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As clarity emerges post-budget, there’s potential for renewed buying—historical trends point to 62% chance of buying resuming after budget day.
Conclusion
Budget 2025 charted a conservative yet balanced path: it offered spend power to households while curbing government outlays. In the equity landscape, that meant consumer-driven industries flourished, while infrastructure-related segments edged lower. Volatility remained front and centre, but a stable macro outlook could pave the way for targeted portfolio gains.