The Indian stock market has experienced notable gains as investors eagerly anticipate the Union Budget 2025, set to be presented on February 1. On January 31, 2025, benchmark equity indices closed higher, with the BSE Sensex rising by 741 points, or 0.97%, to settle at 77,500.57, and the NSE Nifty gaining 258.90 points, or 1.11%, closing at 23,508.40.
This upward trend reflects strong market sentiment fueled by expectations of a pro-growth budget, as indicated by the recently released Economic Survey. Vinod Nair, Head of Research at Geojit Financial Services, stated, "The indices are fueled with expectations of a pro-growth budget and prudent fiscal as indicated in the economic survey.” The survey underscored optimism, highlighting anticipated reductions in individual taxation and increased job creation which could stimulate consumption.
The broader market performed well, with mid-cap and small-cap indices outperforming their large-cap counterparts, each witnessing gains of nearly 2%. The Nifty Mid-cap index surged 1.89%, and the Nifty Small-cap index gained 1.87%. This broader index performance was indicative of market confidence, bolstered by positive global cues and strong quarterly results from several major firms.
According to the Economic Survey 2025, India is anticipated to achieve GDP growth between 6.3% and 6.8%. Avinash Gorakshkar, Head of Research at Profitmart Securities, remarked, "The economic survey suggests the Indian economy is expected to grow, even amid global challenges. It reflects expected stability and improved quarterly numbers from listed entities.” This indicates the government’s focus on continued infrastructural spending and fiscal prudence, aiming to support economic recovery.
The Economic Survey also projected the BSE stock market capitalization to nominal GDP ratio at 136% as of December 2024, which exceeds similar ratios for other major economies, including China at 65% and Brazil at 37%. This positions the Indian market as relatively healthier and indicative of strong investor confidence, albeit cautioning about potential overvaluation risks.
Investors are particularly optimistic about the upcoming Union Budget, with expectations of substantial allocations for sectors like electronics, renewable energy, and agriculture. Anand Dubey, CEO of Indkal Technologies, expressed, "This budget will drive growth and technology adoption across sectors, especially for startups and manufacturing.” His sentiments echo the broader call for fiscal incentives to bolster innovation and support local industries.
The market rally was also significantly supported by positive performances from companies reporting their third-quarter earnings. For example, Nestle India posted a net profit increase of 6% to ₹696 crore, buoying sentiments and contributing to the overall market surge. Other companies such as GAIL and Larsen & Toubro also reported quarterly gains, enhancing investor confidence.
Corporate earnings have been noteworthy, with companies across industries exhibiting resilience and growth. With expectations for the government to advocate reduced GST rates for various sectors, investors are eyeing potential growth catalysts within the budget which are expected to provide immediate impact on consumption patterns and industrial growth.
It is important to note, as per analysts, the ramifications of these budget expectations should not be overlooked. The recent economic survey sounded warnings about possible market corrections stemming from high valuations and fluctuated global sentiments. This highlights the delicate balance investors must maintain as they navigate the upcoming budget's outcomes.
All major sectors are on watch for expected investments, particularly focusing on technology, agriculture, and infrastructure development—a resonance of India’s long-term strategic goals. The upcoming budget is perceived as more than just fiscal policy; it encapsulates the government's vision for inclusive growth and socio-economic balances.
The anticipation surrounding the budget has created significant volatility, often reflected by shifting trading patterns and investor sentiments. Hence, as the budget date approaches, many experts recommend investors maintain caution and evaluate their positions cautiously.
Market watchers predict the post-budget scenario may reveal strong opportunities, particularly if government initiatives align with investor expectations of growth stimulation and reforms. The medium to long-term market trend is expected to pivot from budget announcements, earnings growth, and macroeconomic indicators.
Overall, the Indian stock market's current performance reflects significant optimism intertwined with cautious anticipation of the forthcoming Union Budget. Investors remain alert, ready to respond to the proposals aimed at energizing growth, addressing the socio-economic challenges, and advancing India’s ambitions on multiple fronts.