Indian markets ended the special trading session on Budget Day on a flat note as investors reacted negatively to the Union Budget 2025, which announced a modest 10% year-on-year increase in capex, falling short of market expectations. Economists had anticipated that the government would announce a higher capex allocation amid the slowing Indian economy.
The Nifty 50 ended the session with a marginal drop of 0.11% at 23,482, while the Sensex closed flat at 77, 505. The Nifty Smallcap 100 index rose 0.12% to 16,560, while the Nifty Midcap 100 index concluded the day with a drop of 0.42%, closing at 53,486. However, Nifty Smallcap 100 index has managed to end the session in green, rallying 0.41% to settle at 16,979 level.
The Budget 2025 took markets by surprise with its focus on both capex and income tax. As expected, the government targeted the falling consumption, particularly in urban India, in an effort to revive economic activity.
To boost this, Finance Minister Nirmala Sitharaman announced that no income tax would be levied on incomes up to Rs12 lakh. Prior to the Budget, there was widespread anticipation that she would offer relief to middle-class consumers by raising the tax exemption limit to ₹10 lakh and adjusting tax rates across various slabs.
In recent months, demand from urban India has been shrinking due to rising food inflation and a drop in wages, which is reflected in the performance of FMCG, auto, and consumer durable companies. However, today's income tax cut provided a strong boost to these sectors.
The Nifty FMCG index ended the session with a gain of 3%, followed by Nifty Consumer Durables and Nifty Auto, rallying 3% and 1.2% respectively.
Mahavir Lunawat of Pantomath Financial Services Group said, "The restructuring of tax slabs has resulted in a simpler and more progressive framework, ensuring that people have greater disposable income that will eventually lead to strong investment for better future."
Mahavir added, "By streamlining the tax system and making it more accessible, these changes are expected to boost savings and increase participation in primary and secondary markets, leading to better capital formation overall."
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