On February 1, 2025, the Indian stock market showcased resilience as the benchmark indices, the Sensex and Nifty, advanced significantly amid investor speculation surrounding the forthcoming Union Budget. The BSE Sensex surged by 136.44 points, or 0.18%, to settle at 77,637.01, whereas the Nifty climbed by 20.20 points, or 0.09%, reaching 23,528.60. This intriguing performance points to investor optimism just hours before Finance Minister Nirmala Sitharaman is scheduled to present her eighth consecutive Union Budget at 11 AM IST.
Despite low expectations from the budget, stock market analysts noted the recent uptick may indicate the market could be on the cusp of bottoming out. The majority of shares advanced, with 2,320 stocks rising compared to 737 declines, reflecting healthy market breadth.
Analysts believe the Union Budget could focus on uplifting the ease of doing business conditions, particularly for micro, small, and medium enterprises (MSMEs). They anticipate pro-growth measures aimed at enhancing domestic supply chains and increasing investments in clean technology. Nirmal Bang Institutional Equities noted key priorities are likely to include forging stronger foreign direct investment (FDI) and improving productivity through strategic budget allocations.
“On the Budget day, the market reactions will be quick... the market will be looking for growth-stimulating measures and not market-related taxation reliefs,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. His insights reflect investors' sentiments as they await key fiscal policy announcements aimed at stimulating economic growth.
Recent data shows the Sensex reclaimed the 77,500 mark, amassing over 2,130 points within four days leading to the budget, illustrating the momentum before such pivotal fiscal events. Jefferies, the foreign brokerage, indicated the possibility of the Nifty bottoming out before February 7, provided the budget does not reveal any surprises related to taxation.
Sitharaman's budget speech is highly anticipated, and expectations are running high, particularly for potential cuts to personal income tax. This would be seen as providing relief to the middle class, which can lead to boosted consumption and growth recovery. The Chief Investment Strategist urges caution, remarking, “The extent of the tax relief remains to be seen. The fact is there is no fiscal space for big relief.”
The market has shown strength recently, as reflected by increasing investments encouraging significant activity across various sectors. Notable gains were observed from companies including IndusInd Bank, UltraTech Cement, and Mahindra & Mahindra, along with positive movements across railways and defence-related stocks, as analysts foresee increased allocations for Vande Bharat trains and defence capital expenditure.
Technical analysts remain optimistic as they highlight the potential for sustained growth as long as Nifty remains above the 23,300 support levels, with strategic buying opportunities anticipated—dubbing it as favoring a “Buy-on-Dips” approach. Dhupesh Dhameja, Derivatives Analyst of SAMCO Securities, affirmed, “A decisive move above 23,550 could accelerate the rally, setting the stage for meaningful gains.”
The economic sentiment leading up to the budget promises to keep investors engaged. Analysts highlight the importance of the overall economic health reflected through anticipated government policies targeting agriculture, investments, and export-driven growth, which are seen as engines of growth for the economy.
Overall, the stage is set for traders and investors as they watch the clock tick down to Sitharaman’s budget address, with the fate of fiscal policies and potential market movements hanging delicately on the decisions announced during her speech. The Indian stock market's performance serves as both a precursor and reflection of the larger economic narrative leading to Budget 2025-26.