Union Budget 2025 sees mixed market response

Kaityn Mills
2 Min Read
Union Budget 2025 sees mixed market response

The Union Budget for the financial year 2025-26 has elicited a cautious response from stock markets in India. The BSE Sensex gained a marginal 5.39 points, while the Nifty finished down 26.25 points.

The mixed reaction is attributed to the modest 10 percent year-on-year increase in capital expenditure (capex) for FY26, which fell short of investor expectations.

Key sectors like railways, defense, and infrastructure, which have substantial market influence, saw dampened sentiment.

Consumption-based sectors, expected to benefit from personal tax exemptions, had a limited impact on the broader market due to their modest market mix position. Tanvee Gupta Jain, chief economist at UBS India, expressed disappointment with the capex budget, which increased only 0.9 percent from the previous fiscal.

Mixed market reactions to capex plan

The Budget allocated Rs. 11.21 lakh crore towards capital expenditure for FY26, seen as insufficient given higher nominal GDP growth assumptions.

The central government has targeted bringing down the fiscal deficit to 4.4 percent of GDP in FY26 from 4.8 percent in FY25, reflecting a slowdown in fiscal consolidation efforts observed over the past four years. Navneet Munot, MD and CEO of HDFC Asset Management, noted that the Budget managed to walk a tightrope, emphasizing fiscal consolidation while also aiming to stimulate economic growth by increasing disposable income through tax relief for middle-class households. Despite potential short-term market volatility due to the global economic backdrop, the long-term trajectory rooted in policy prudence and support for growth is expected to bolster India’s appeal to both foreign and domestic investors.

Only a few sectors like FMCG showed resilience, with the BSE FMCG index closing nearly 3 percent higher, driven by consumption-led buying. This was the first full-year Budget of the coalition government since it assumed power for a third consecutive term in 2024, aiming to strike a balance between growth and fiscal prudence amid challenging economic risks.

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Kaitlyn covers all things investing. She especially covers rising stocks, investment ideas, and where big investors are putting their money. Born and raised in San Diego, California.