As usual, the union budget becomes important for investors in all respects and finally pours into different sectors of the Indian stock market. On February 1, 2025, Finance Minister of India, Nirmala Sitharaman Ji presented the Union Budget 2025. This year's budget is projected to focus on tax reforms, capital expenditures, infrastructure development, and significant adjustments to capital gains tax.
Some sectors have gained a little momentum, while others have seen their stock prices drop. There is more, however, regarding the Impact Of the Union Budget 2025 affects the Indian stock market.
This proposal is the most significant part of Budget 2025. It states that the personal income tax slab was changed. The government raised the exemption limit from ?7 lakh to ?12.8 lakh per year, which is likely to help middle-class taxpayers save more.
Consumer spending, which will boost sectors such as:
> FMCG: Hindustan Unilever, Nestlé, and ITC continue to gain momentum as increased disposable income leads to higher everyday spending on essential products.
> Automobiles: Maruti Suzuki, Tata Motors, and Mahindra & Mahindra stocks are expected to move higher, as more funds are directed to personal vehicles instead of public transport.
> Retail & E-commerce: Avenue Supermarts and Reliance Retail would benefit from the increasing disposable income of the people, thereby seeing much demand.
The administration's capital expenditure budget for FY 2025-26 is ?11.2 trillion, a little increase over this time last year. The main focus topics are highways, trains, and urban development.
Still, the below-expectations growth for spending has resulted in mixed reactions in the market:
> Infrastructure stocks taking a wider sell-off - Larsen and Toubro (L&T), PNC Infratech, and IRB Infrastructure face declines in stock prices as capital allocations were less than expected.
> Cement And Steel Stocks Are Broadly Positive: Ultratech Cement and Tata Steel increased slightly as projects boosted demand for raw materials.
One aspect of Budget 2025 that may have overshadowed everything else was the increase in capital gains tax, which caused major concern among investors.
> Long-term capital gains (LTCG) The listed share price has been raised from 10% to 12.5%.
> Short-Term Financial Gains: Increased from 15% to 20% for specific assets.
> Services Activity Tax: Added by 0.1% for all equities sales and purchases.
Because of the additional tax burden, the market's front-line indices plummeted nearly immediately as investors rearranged their portfolios.
|
SECTOR |
IMPACT |
REASON |
|
Consumer Good And FMCG |
|
Tax cuts increase disposal income. |
|
Automobiles |
|
Higher demand is generated due to higher disposable income. |
|
Retail and E-commerce |
|
Consumers will be spending more on informal and formal shopping. |
|
Infrastructure |
|
A small increase in capex disappointed investors |
|
Real Estate |
|
Household demand might increase owing to tax benefits. |
|
Financial Services |
|
Higher capital gains tax reduces market participation. |
|
Insurance |
|
The government makes the taxation of an insurance-linked investment unattractive. |
In general, public reaction to the 2025 Budget has proved mixed: some measures were well received by citizens, while others, including financial services and infrastructure, brought about short-term volatility.
Investor Takeaways -
> New Tax Frame Work: Markets are expected to be stable in the short term as they adjust to the new tax framework.
> Long Term: The consumer and real estate sectors, however, remain in good favor.
> Investment Strategy: The investor must, therefore, prioritize a mixture of consumer, technology, and infrastructure stocks, within a diversified portfolio.
Union Budget 2025 sought to find a fair balance between economic growth and fiscal prudence; investor sentiment, battered through capital gains tax hikes and spendthrift cuts, takes one on this tangent. Quoting the consumer quadrants to be the main winners, infrastructure and financial markets seem to face short-term headwinds.
Again, as the Impact Of the Union Budget 2025 affects the Indian stock market,
the dynamics will change, and investors should keep themselves updated following long-term horizons for sustained returns. What are your views regarding Budget 2025? Will it drive the Indian stock market upwards in the long run? Let us know in the comments!
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Go and watch to avoid problems and learn about the stock market with exact logic and strategies!
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