
Investors are now placing high hopes on the upcoming Union Budget to revive market sentiment, as the ongoing equity market downturn has eroded over Rs 27 lakh crore of investor wealth in the first month of 2025. Finance Minister Nirmala Sitharaman is set to present the Union Budget on February 1.
“This year's budget is crucial as it presents an opportunity to shift the focus from capex to consumption. This shift, if successful, could significantly boost the economy, which has been hampered by a slowdown in GDP growth due to the impact on consumption. The potential benefits of this shift are substantial and could bring about a much-needed change in the market sentiment,” said Anand K. Rathi, Co-Founder of MIRA Money.
Rathi explained that the budget holds particular significance as Indian consumers are currently burdened with high taxes and escalating interest rates. “If the budget is favourable, we can expect the market to stabilize and begin to rise, driven by the optimism surrounding improving earnings. While it may not be an immediate recovery, we can anticipate that earnings will start to show signs of improvement from this point forward,” he stated.
The market capitalization of all BSE-listed firms has come down from nearly Rs 446 lakh crore at the start of the month to about Rs 419 at the end of Thursday’s (Jan 30) session, resulting in a wealth erosion of Rs 27 lakh crore. While the benchmark indices – BSE Sensex and NSE Nifty - have plummeted more than 2% each so far in January, a much bigger pain is seen in the midcap and smallcap indices.
While the market experiences pressure in the run-up to the Union Budget is not a new thing, this time the headwinds are many too. The market has been under pressure since the start of October due to uncertainty surrounding US trade policy under the new president Donald Trump, relentless selling by foreign institutional investors amidst a decline in rupee value against the US dollar and a slowdown in corporate earnings among other things.
Amar Deo Singh- Senior Vice President, Research, Angel One, said that the markets are eagerly awaiting the outcomes of the Budget 2025, the 8th in line by the Finance Minister.
“Focus is likely to be boosting consumption, thrust in infrastructure spending & job creation. Also, the middle class & the income taxpayers are hopeful of some form of tax rebate that could ease their financial situation," he said adding that; "...given the current domestic Economic slowdown, record FII outflow, Rupee hitting record lows along with global macros & the Trump factor, makes it all the more an interesting budget to watch out for.”
In the past five years, the benchmark Nifty 50 has fallen four times in a single month before the Union Budget. Only in 2024, Nifty50 surged over 4% in a single month before the Budget.
Indian equity indices ended in the green on Thursday. At close, the Sensex was up 226.85 points or 0.30% at 76,759.81, and the Nifty was up 86.40 points or 0.37% at 23,249.50.