Budget fails to enthuse markets as lower spending outweighs tax cut relief
Mail This Article
Mumbai: The early enthusiasm during the special Saturday session of the Indian stock markets soon turned into disappointment as lower government spending outweighed the tax cut relief.
After the government raised its capital expenditure budget only modestly, infrastructure-related stocks tanked, dragging the markets down. However, the indices came back into black riding on consumption-linked sectors.
At 2:30 p.m., the Nifty 50 was up 34.4 points to 23,542.80, while the BSE Sensex was up 156 points to 77,655.
Finance Minister Nirmala Sitharaman, in the annual budget, set the capex outlay at Rs 11,200 cr for 2025-26, a modest increase from 2024-25.
Sandeep Nayak, CEO of retail broking at Centrum Broking, told Reuters that it was a "mild negative."
Infrastructure firms: Larsen & Toubro (L&T), PNC Infra, and NBCC each dropped, with L&T being the top Nifty loser.
"The budget fell short on government allocation, which has led to a drop in capital goods, engineering and infrastructure companies, weighing on markets," Gaurav Dua, senior vice president and head of capital markets strategy at Mirae Asset Sharekhan, told Reuters.
The boost given to the salaried class via income-tax rebate helped consumption-linked sectors such as fast-moving consumer goods rose 4.4%, while auto and realty gained 2.1% and 2.2%.
"With the economy slowing down and considering the low consumption demand, the government's tax relief is a big relief and would boost demand and consumption," said Divam Sharma, co-founder and fund manager at Green Portfolio.
Ten of the 13 major sectors declined, while the more domestically focussed mid-cap and small-cap indexes shed about 0.6% and 0.9%, respectively.
Sharekhan's Dua, however, said the budget was broadly in line with expectations, giving the markets leeway to take a pause after gaining about 3% in the four sessions leading up to the budget.
Fertiliser companies advanced after the government announced a further increase in urea supply.
Footwear makers rose on policy plans to support the leather industry, while tourism-linked companies gained on plans to develop top destinations with key infrastructure.