No Budget Day cheer for market, street turns bullish on consumer goods stocks
MUMBAI: India’s equity market witnessed significant volatility on Budget Day (Saturday, February 1), with benchmark indices BSE Sensex and NSE Nifty opening the special trading session on a positive note before experiencing a sharp decline between 11:45 AM and 11:55 AM.
The Sensex plunged nearly 900 points from its peak but rebounded into positive territory by around 1:40 PM. By the close of the session, the Sensex ended marginally higher by 5.39 points (0.01%) at 77,506 while the Nifty slipped 26.25 points (0.11%) to settle at 23,482.
During the trading session, Sensex hit an intraday high of 77,899 and a low of 77,006 and the Nifty50 gyrated between 23,632 and 23,339.
The sharp fall during the budget hour is primarily attributed to a low increase in capital expenditure (capex), which according to experts, might weigh on economic growth. 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 budget 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 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. Among sectors, Consumer Durables, Realty, Auto and FMCH indices gained between 1.9% and 3.3%. On the other hand, Capital goods, power, PSU indices, which are dependent on capex, fell 2-3%. Metal, IT, energy declined 1-2%.
Pranav Haridasan, MD and CEO, Axis Securities said that 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. This conviction comes as the personal income tax will be exempted for individuals earning up to Rs 12 lakh annually, leaving them with higher disposable income.
“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 investors,” he added. Manish Jain- Chief Strategy Officer, Institution Business, Mirae Asset Capital Markets said that the budget is not very positive for banking. He added that a rise in gross borrowings is negative for banks as yield could rise which could impact treasury income.
Following the budget announcement, India's 10-year benchmark yield closed 0.33% higher at 6.690%. Rajeev Radhakrishnan, CIO - Fixed Income, SBI Mutual Fund said that from a bond market perspective, the gross borrowing numbers at Rs 14.8 lakh crore are higher than market estimates and could be mildly negative. Pankaj Pathak, Manager, Fixed Income, Quantum Mutual Fund, also said that the market borrowing estimate for FY26 is a little higher than expected. “Additionally, the government has set a higher target of Rs 2.5 lakh crore to switch near-maturity bonds to longer maturity bonds — effectively increasing the supply of long-term bonds in the year. The bond market would be somewhat disappointed as a result, and yields might go up next week,” said Pathak.
Meanwhile, Gold prices were highly volatile on Budget Day. After falling to Rs 81,500 level, it managed to close Rs 129 higher at 82,100 on the MCX.