Market reacts to profit booking, capex concerns, and global headwinds despite positive income tax reforms.
February 1, 2025: The Indian stock market experienced a sharp decline on February 1, despite Finance Minister Nirmala Sitharaman announcing an income tax relief package that slightly exceeded expectations in her Budget 2025 speech. The Sensex fell by 500 points to 77,006.47 during intraday trading, and the Nifty 50 dropped over 0.5% to 23,346, ending a four-day winning streak.
While FMCG, consumer durables, and auto stocks saw a temporary boost following the announcement of no income tax on earnings up to ₹12 lakh, the broader market indices, including the BSE Midcap and Smallcap, faced deeper selloffs of up to 1%.
Key Announcements in Budget 2025:
Also Read: Memes Take Over Social Media After Budget 2025 Tax Reforms Announcement-Here Are The Best
- Income Tax Relief:
- Zero tax on income up to ₹12 lakh, with salaried individuals enjoying an additional ₹75,000 standard deduction.
- Revised tax slabs aimed at boosting middle-class consumption, savings, and investments.
- Focus on Capex: The government allocated ₹11 lakh crore for FY25 infrastructure projects but fell short of expectations for increased defense and capital goods spending.
Why Did the Market Fall?
- Profit Booking:
- According to experts, The market fall reflects profit booking after most Budget expectations were met. The focus has now shifted back to global concerns.
- Capex Allocation Disappointment:
- Experts also highlighted that the ₹11 lakh crore allocation fell short of expectations, particularly in sectors like defence and railways. This led to a downturn in capital goods, engineering, and infrastructure stocks.
- Global Concerns:
- Ongoing foreign capital outflows and geopolitical uncertainties further dampened market sentiment.
Expert Insights:
- Sector Rotation: Experts anticipate a market correction in the broader indices (SMID space) for 2025, with growth opportunities in IT services, FMCG, pharma, and select banks.
- Adage in Play: The old market adage of ‘buy on rumours, sell on news’ aptly applies, as the market digests Budget announcements and shifts focus to global and domestic challenges.
Broader Implications:
Despite the short-term decline, experts believe the tax reforms and capex initiatives could support consumption-driven growth in the long run. However, infrastructure and defense sectors might need more robust allocations to sustain investor confidence.
Tags:
Sensex Drops, Budget 2025 Market Reaction, Income Tax Reforms, Stock Market Analysis, FMCG Surge, Infrastructure Stocks, Profit Booking, Capex Allocation, Nirmala Sitharaman, Indian Economy