
India’s equity market benchmark BSE Sensex fell sharply from the day’s high and crashed nearly 900 points after the finance minister Nirmala Sithraman presented the Union Budget in the parliament today. The Nifty50 index also fell sharply following the budget.
From an intraday high level, the two indices fell more than 1 percent. Sensex hit a day high of 77,899 and a low of 77,006. The Nifty50 hit a day high of 23,632 and a low of 23,339. Following one and a half hours of sharp sell-off between 11.45 am and 1.15 pm, the market made a recovery. As of 2 pm, Sensex was trading with a modest gain of about 20 points at 77,520 and Nifty was trading just 12 points lower at 23,495.
The sharp fall following the budget announcements is mainly attributed to a low increase in capital expenditure (capex). For 2025-26, the capex has been increased by a modest 10% to Rs 11.2 lakh crore.
Pankaj Pandey, Head of Research, ICICI Direct, said that the Union Budget 2025-26 is a confluence of consumption push (through personal income tax benefit) and capex moderation with Fiscal Prudence taking precedence over growth. “We note that FY26 Capex allocation of Rs 11.2 lakh crore, growth of 9.8% YoY over FY25RE (revised estimate) is a bit modest, albeit, clearly reflects the government commitment towards fiscal prudence (with Fiscal deficit pegged at 4.4% in FY26 vs. 4.8% in FY25RE), despite growth moderation,” added Pandey.
Given the consumption-focused budget, Pandey expects a pickup in consumption pockets given the tax relief, while capex space is likely to witness only a selective move, ahead.
Vikram Kasat, Head - Advisory, PL Capital, said the budget 2025 seems to have addressed the issue of consumption slowdown by providing a boost to the middle class in the form of lower tax.
“However, capex may not be as budgeted and could be a worry for growth. Further, a New tax code needs to be seen for any changes in capital gain tax,” added Kasat.
In the Nifty 50 index, consumer-centric stocks such as Trent, HUL, Britannia, Maruti Suzuki and ITC were trading with sharp gains. Insurance, manufacturing and financial stocks were under pressure. Agri stocks and select hotel stocks also witnessed a sharp rally as the FM unveiled measures in the Budget to give a boost to this sector.
Among spectral Indices, Nifty FMCG, Nifty Realty, Nifty Consumer Durables and Nifty Auto were up between 2 and 4%. Nifty Metal, Nifty Oil & Gas and Nifty IT were down by more than 1% each.
What capital market executives and market experts are saying?
Ashishkumar Chauhan, MD & CEO, NSE India:
The budget for the financial year 2025-26—the first full-year budget of the NDA’s third term—presented by Hon’ble Finance Minister Smt. Nirmala Sitharaman aims to accelerate growth by providing a fillip to investment (capex up 10% to Rs 11.2 lakh crore) and a significant increase in the spending power of the middle class (the nil-tax slab has been raised over the years from Rs 2 lakh to Rs 5 lakh to Rs 7 lakh over the years, but now there is no tax payable up to Rs 12 lakh on income), while maintaining on the path of fiscal consolidation.
A comprehensive framework of reforms across six major domains including taxation, power sector, urban development, mining, and financial sector has been laid out, to promote sustainable and inclusive growth, with Agriculture, MSMEs, investment and exports identified as major engines of this growth. The budget manages to deliver on consumption, investment and social welfare without compromising on fiscal prudence. The fiscal deficit to GDP for FY26 is budgeted at 4.4% of GDP, ensuring a downward trend in debt-to-GDP levels. Overall, the budget places India in a strong position and shall play an important role in achieving the objective of Viksit Bharat by 2047.
Pranav Haridasan, MD and CEO, Axis Securities:
The Union Budget for 2025-26 largely played to our expectations, particularly with the much-needed income tax relief for the middle class, which will drive consumption and economic growth.
“On capital expenditure, while the budgeted figure of Rs 11.2 lakh crore for FY26 may seem conservative compared to last year’s Rs 11.1 lakh crore, it’s important to note that actual spending in FY25 is likely to fall short of the budgeted target. Even with a measured approach this year, capex is still set to grow by over 10% from the previous year’s realized levels, with the focus rightly shifting to execution. Additionally, grants to states is +40%, INR 4.3 lakh crores, which will also significantly aid capex. Sectorally, this budget is particularly positive for consumer and consumption-driven stocks, which have underperformed recently but now stand to benefit from a demand revival. Financials also present a strong opportunity, acting as a key proxy for economic growth. With the recent correction in both sectors, they offer significant value for investor.”
Rajeev Radhakrishnan, CIO - Fixed Income, SBI Mutual Fund:
“There has been a conscious attempt to spur consumption by rationalising personal tax slabs with a revenue foregone of Rs 1 trillion. Apart from the overall focus on sustaining capex and reforms in key thrust areas, the budget announcements have an intended focus on ensuring sustained economic growth. At the same time, the fiscal consolidation trajectory has sustained with FD estimated to reach 4.4% in FY26 in line with estimates. From a bond market perspective, the gross borrowing numbers at Rs 14.8tr is higher than market estimates and could be mildly negative. However, RBI liquidity operations such as OMO's should ensure a supportive environment for yields”.
Anirudh Garg, Partner and Fund Manager at Invasset PMS:
Stock markets typically react to fiscal policies, and the *fiscal deficit at 4.8% of GDP*, along with continued *government borrowings*, may trigger short-term volatility in bond yields and equity markets. However, the push for *urban infrastructure, medical education, and MSME support* is likely to attract long-term investments, benefiting banking and financial services sectors. Investors should also watch for sectoral movements in *pharmaceuticals & renewable energy* as government incentives will fuel their growth
Sonam Srivastava- Founder and Fund Manager at Wright Research PMS:
If the budget is perceived as growth-oriented while maintaining fiscal discipline, we could witness stabilization or even a reversal in recent FII outflows, particularly in sectors benefiting from government policies such as infrastructure, manufacturing, and financial services. However, if global risk-off sentiment persists, foreign investors may remain cautious despite positive domestic reforms. In the near term, India’s relative attractiveness as an investment destination will depend on how effectively these budgetary measures translate into improved corporate earnings, economic expansion, and policy stability. For sustained FII inflows, it is crucial that execution on key policy initiatives remains efficient, ensuring that India continues to be a favorable market for global investors.
Manish Jain- Chief Strategy Officer, Institution Business, Mirae Asset Capital Markets:
Overall, positive for FMCG, Consumption, Retail, Realty, Auto and new age companies. Not as much positive for banking. Rise in gross borrowings is negative for banks as yield could rise which could impact treasury income. Fiscal deficit target at 4.8% for FY25, and 4.4% of GDP for FY26. With rationalization in direct taxes, one needs to see how government capex targets are set. Move in personal taxes and reduction in BCD in consumer electronics (like flat panels) to boost consumer electronics. Positive for shipbuilding with Maritime Development Fund outlay of Rs 25000, exemption of BCD on raw material and equipment and benefits to ship leasing units announced if they are in GIFT city.
Vinod Nair, Head of Research, Geojit Financial Services:
This forward-looking budget is poised to enhance per capita income over the long term, while its immediate impact will be a rise in consumer spending driven by increased government expenditure and tax benefits. The primary beneficiaries are expected to be industries such as FMCG, retail, textiles, consumer durables, agriculture and electronics manufacturing."