The Indian stock market experienced notable fluctuations following the Union Budget 2025-26 announcement presented by Finance Minister Nirmala Sitharaman. Closing relatively flat on February 1, 2025, the BSE Sensex recorded minimal growth, up by just 5.39 points or 0.01 percent, ending at 77,505.96. Meanwhile, the NSE Nifty encountered slight declines, dropping by 26.25 points or 0.11 percent to close at 23,482.15.
Despite reaching a day high of 77,899.05 earlier, the market showed signs of indecision, evidenced by the formation of a small-bodied candle on the daily chart, marking the session as tumultuous. Sector-specific performances revealed contrasting trajectories; sectors like FMCG, Consumer Durables, and Automobiles gained traction, with the FMCG index climbing by 2.94 percent, bolstered by anticipated boosts from the budget’s tax relief measures.
The budget proposed significant tax reforms, including the non-taxable income threshold raised to ₹12 lakh, sparking optimism among consumers and businesses alike. These changes are expected to bolster disposable income, hence driving greater consumption across various sectors. Following this announcement, the FMCG sector saw stocks like Hindustan Unilever (HUL), ITC, and DMart report notable gains. The BSE FMCG Index surged by 4.86 percent encouragement from agricultural reforms and improved rural income.
Real estate, another sector poised for growth, is likely to benefit from the government’s continued focus on affordable housing through initiatives like the Pradhan Mantri Awas Yojana (PMAY). This program, along with the introduction of the SWAMIH Fund, will facilitate the completion of additional housing units, serving both affordable and mid-income segments. The realty sector saw growth of 1.77 percent on the budget's positive outlook, aligning with increasing disposable income levels among potential homebuyers.
The mobile phone industry is also expected to reap rewards from reduced import duties on components and policies supporting domestic manufacturing under the 'Make in India' initiative. Specifically, import duties on key components—such as camera modules and lithium-ion batteries—were slashed to encourage local manufacturing, which could reinforce India's position as a global electronics hub.
While much of the market responded positively to the budget news, not all sectors fared equally. The automobile sector faced challenges, particularly following announcements related to electric vehicle (EV) battery manufacturing, where customs duties on many raw materials were reduced to stimulate growth. Despite this support for future battery manufacturing, investors are wary about immediate impacts on vehicle pricing and sales.
Conversely, defense stocks plummeted, with some declining up to 8 percent, reflecting skepticism amid allocations totaling ₹4,91,732 crore. Railway and telecom stocks also faced pressure, with the former dropping over 6 percent due to the perceived lack of significant budget announcements, and telecom companies like Bharti Airtel seeing unclear benefits from broadband expansion efforts.
Overall, the budget dialogue left analysts divided. Market experts emphasized the need for traders to remain vigilant, identifying support levels for the Nifty at 23,280, cautioning against potential downside risks if below this threshold. Short-term predictions indicate the Nifty could move upwards between 23,700 to 24,000 should it maintain above supportive levels, but any downturn could incite panic among investors.
The fluctuations were accentuated by external factors, including global market trends, as Wall Street indices faced declines due to imposed tariffs on key trading partners by the U.S. administration. Despite mixed sentiments domestically, the response to the Union Budget reveals significant potential within consumption-driven sectors, promising shifts in market dynamics.
Reflecting on market sentiment and future expectations, the Budget 2025 is marked as transformative, paving the way for anticipated shifts primarily beneficial for consumption-led sectors, even as infrastructure and capital expenditure-dependent industries may navigate short-term hurdles. Analysts continue to advise caution but remain optimistic about potential long-term gains as policies take root.