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In the last two decades, it has not happened that markets have corrected four months on a trot. And that was happening just before the budget, which means that the market was going into the budget with really low expectations.

And that is good news! Now, this doesn’t mean that adverse moves from a capital market perspective will be taken kindly.

It’s just that the base is so low that if it is just about a budget that meets expectations or mildly lacks, then the market may not experience a significant downturn. This is because stock prices have dramatically declined from the recent highs.

However, the budget did exceed the expectations for middle-class working professionals and startups.

This year’s budget seems to focus on empowering the common man through tax reforms, encouraging foreign investors, and supporting startups and MSMEs.

But was it enough? And more importantly, is it optimistic for investors?

Well, in this article, we explore what you, as an investor, can expect from the implication of Union Budget 2025-26 on the stock market and what’s in it for you.

Table Of Contents:

What To Expect From Union Budget 2025 For Investors?

The Union Budget was announced on February 1, 2025, arriving at a time of unprecedented global uncertainty and a stagnant domestic economy.

However, the Indian economy is still the best-performing economy amongst major economies in the world in terms of growth statistics despite a lower-than-expected GDP of 6.3 percent as projected for 2024-25.

Let’s look at what investors can expect from Union Budget 2025-26:

1. Increasing Foreign Investment

The budget is set to meet the expectations of the global fraternity to welcome more investments in India through:

2. Increasing Disposable Income For Higher Consumption

The income tax reductions where no tax is payable for individuals earning up to ₹12 lakh.

This alone is an empowering step towards boosting the disposable income of the middle class in the country. This encourages higher consumption and more money to invest as well.

3. Support For Startup And MSMEs

The government emphasises maintaining financial discipline and rationalising expenditure while ensuring enough market liquidity for better investments.

Increased credit limits allow MSMEs to raise to 10 crores. Also, small businesses will have better access to financial resources.

4. Lower Fiscal Deficit And Stable Borrowing

The fiscal deficit for FY25 is 4.8% of GDP, which is better than the initial projection of 4.9%. Next year, in FY26, it is expected to reach 4.4%, signifying a cautious yet optimistic approach towards fiscal consolidation.

Increased credit limits allow MSMEs to raise to 10 crores Also, small businesses will have better access to financial resources.

Sectors Benefiting From Union Budget 2025-26

The stock market experienced high volatility that day, eventually closing flat. Overall, there was a mixed reaction in the stock market with some significant impact on certain sectors, majorly including:

1. Real-Estate: The real-estate sector will witness positive outcomes through the government’s focus on affordable housing, increased disposable income and dedicated funds supporting housing.

2. Auto: The automobile sector is largely influenced by several other budget allocations and proposals, primarily related to electric vehicles (EVs). Custom duty reductions on 25 minerals, including lithium, promote EV battery manufacturing in the country, making it more affordable.

2. FMCG: The Fast-Moving Consumer Goods (FMCG) sector is expected to witness significant growth from the budget. Tax relief will increase disposable income, boosting consumption. Some agricultural reforms will further enhance farmer income, increasing rural consumption as well.

Some other sectors that can also benefit from Union Budget 2025 are:

Then, a few sectors also experienced a decline, even marginally, such as railways, healthcare and defence.

What Should Concern You?

Despite the market’s neutral reaction to the union budget, it wasn’t enough to move the needle, yet leaving investors on a cautiously optimistic note

However, there are some aspects concerning for investors to highlight.

Minimal Increase In Capital Expenditure

The modest budget increase in capital expenditure raised concerns for investors focusing on infrastructure development. The allocations to Infrastructural sectors such as roads and railways shrunk, even though aerospace/defence was given enough to keep pace with inflation.

This may slow the momentum of infrastructure projects, affecting businesses reliant on government contracts and public works. Also, it will reduce employment opportunities in this sector.

Decline In Tradition Tax-Driven Insurances

Due to the revised tax slabs resulting in higher disposable income, the appeal of tax-saving insurance products will reduce, leading to a decrease in demand. This will hype the consumption-driven sectors like FMCG, automobiles and domestic tourism.

Global Economic Factors

Overall, in the last four months, the Nifty 50 index saw month-on-month (M-o-M) losses primarily due to sustained selling of FIIs, further contributing to the rupee’s fall against the dollar.

Fortunately, the consistent buying by Indian mutual funds and other domestic institutions prevented the steeper downturn of the stock market.

We suggest deriving valuable insights from these union budget highlights and positive gains in these sectors, leveraging them for smart investments.

PINC Wealth, a leading wealth management company, can help you achieve your investment goals by providing access to professionally created portfolios based on fundamental research and focused on realistic returns. Get started today!

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