The capex theme which was a favourite of Dalal Street in recent years, may take a back seat for some time as the government shifts its focus to boosting consumption amid the urban slowdown.
Market watchers believe that the tax rebate may infuse Rs 1 lakh crore into the hands of middle-class households nationwide, but equity markets were not excited. After falling marginally by 0.1% during the special trading session conducted on Budget Day (February 1), the benchmark equity index NSE Nifty 50 declined by more than 0.5% to 23,361 on February 3.
Wealth manager Emkay Global Financial Services has maintained its December 2025 target for the Nifty 50 index at the 25,000-mark. Market veteran Vijay Kedia, Director, Kedia Securities, told BTTV that the consolidation in the stock markets may continue as the tax relief may not bring any major movement or shift.
Pawan Parakh, Fund Manager at financial services company Geojit Financial Services, says the government has tried to improve consumer sentiment via a massive increase in the zero tax slabs.
While the key takeaway from the Budget leans towards income tax cuts and, as a result, a boost to consumption, Vipul Bhowar, Senior Director-Listed Investments at financial advisory company Waterfield Advisors, says the Budget has created opportunities for a shift in market dynamics, positioning consumption-driven sectors as likely winners. Additionally, substantial alterations in personal taxation are poised to benefit consumer durables, quick commerce, and FMCG significantly.
Expectations are the markets will now shift their focus back to global cues, bond and currency markets, flows from foreign institutional investors, RBI’s stance on interest rate decisions, Inflation outlook, and holistic economic growth.
"Over the last four months, ever since the world has been under the massive tariff threat from the US, inflation expectations have heightened there. This has led to an increase in the US 10-year bond yields and the appreciation of the dollar against most global currencies. This coincided with India’s growth slowdown and the consequent FII-led sell-off," says Parakh, adding the Indian economy may be nearing the end of FII outflows.
On the other hand, US President Donald Trump’s second term raises concerns about intensified trade tensions affecting India. “BFSI, IT, and pharmaceutical stocks reliant on US markets could face headwinds,” says Vaibhav Porwal, Co-founder of investment firm Dezerv.
Parakh adds the new US President is clearly focussed on balancing the trade deficit with most countries through tariff actions. “We do not believe India will face the same blanket tariffs as other countries. However, India is not entirely immune to Trump’s policies. With the recent correction, markets have already factored in the possibility of tariffs on India. In the absence of major tariffs, markets could see a sharp recovery in H2CY25,” he says.
Amid the ongoing market sell-off, the large-cap 50-share Nifty index has dropped 9% between October 2024 and January 2025, while broader indices such as the Nifty Midcap 150 and Nifty Smallcap 250 have fallen by 11% and 13%, respectively, during the same period.
"We believe that large-cap-heavy portfolios will continue to create wealth for investors over a three-year horizon," says Porwal.
The government is now banking on rekindling animal spirits and encouraging the private sector to take the lead in investments by prioritising consumption growth. Whether this will translate into a rally, only time will tell.
@iamrahuloberoi