Sensex, Nifty: Why stock market is rising today ahead of Union Budget 2025

Benchmark stock indices Sensex and Nifty opened higher in a special trading session on Saturday, ahead of Union Budget 2025. Stock market analysts noted that investors are keeping low expectations from the Budget this time, but the recent rise has raised hopes that the market has or will bottom out soon. 

The BSE Sensex rose 136.44 points or 0.18 per cent to 77,637.01. Nifty added 20.20 points or 0.09 per cent to 23,528.60. Nirmal Bang Institutional Equities believes that the priorities in the Budget and beyond are likely to be ease of doing business and deregulation for MSMEs, strengthening the resilience of domestic supply chains and backward integration and encouraging domestic investments in clean and green technologies and energy transition related industries. It also sees strengthening of FDI in India and improving productivity of investments as key Budget themes.

Among Sensex stocks, IndusInd Bank rose 2.98 per cent to Rs 1,021.75. UltraTech Cement, Mahindra & Mahindra, NTPC Ltd, ITC Hotels, Sun Pharma and Asian Paints added over 1 per cent each. The sentiment was positive across the broader market, with 2,320 shares rising and 737 shares trading in the red.

 Brace for wild swings 

"On the Budget day, the market reactions will be quick in response to Budget announcements. A major expectation from the Budget is a cut in personal income tax to provide relief to the middle class and boost consumption, thereby facilitating growth recovery. The extent of the tax relief remains to be seen. The fact is that there is no fiscal space for big relief," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Vijayakumar said the market will be looking for growth stimulating measures and not market-related taxation reliefs like changes in the capital gains taxation.

"The market response to the Budget will not last more than a few days. Trends in growth and earnings recovery will dictate the medium to long-term market direction," he said.  
  

Market bottom in place?
Foreign brokerage Jefferies believes that Nifty may bottom out before February 7, assuming there is no tax-surprise in the Union Budget 2025. It sees rate-sensitive stocks to do well in the expected near-term rally. Jefferies said the recent correction was the second longest of the 10 corrections in the last 10 years. At 15 per cent, the current correction is in line with the average corrections, it said.

Stocks in focus

Cigarette stocks such as Godfrey Phillips India Ltd, VST Industries, Golden Tobacco and ITC were in focus today. Stock market analysts believe no tax hike would be the best scenario for cigarette stocks, followed by a single-digit growth in taxes that they believe could be easily absorbed by cigarette makers. 

Bharat Dynamics Ltd (BDL), Hindustan Aeronautics Ltd (HAL), Mazagon Dock Shipbuilders Ltd, Bharat Electronics Ltd (BDL), Astra Microwave Products Ltd, Cochin Shipyard Ltd, MTAR Technologies Ltd and Zen Technologies Ltd are among a dozen defence stocks that are in focus today. Manish Chowdhury of StoxBox sees a modest 6-8 per cent rise in defence capex from Rs 1.72 lakh crore in FY25. From the defense sector, he continues to remain positive on HAL, Mazagaon and DCX Systems, given the large executable order book and sectoral tailwinds.

Among railways, analysts see increased allocation for the Vande Bharat Trains in Budget and expect 400 new trains to be inducted. 

The strong ordering on the coaches and trainset, Antique Stock Broking said, would be positive for Siemens Ltd, BEML Ltd, BHEL and Titagarh Rail Systems Ltd. Any increase in allocation for Kavach, would be positive for players such as RailTel Ltd, HBL Power Systems Ltd and Kernex Microsystems Ltd. Overall it sees railway outlay of Rs 2.7-2.8 lakh crore, up 8-10 per cent YoY, which would benefit RITES, Rail Vikas Nigam Ltd (RVNL), IRCON International Ltd and others. This was against a 5 per cent rise in allocation for FY25.

Technical outlook

Dhupesh Dhameja, Derivatives Analyst, SAMCO Securities said consistent buying on dips underscores the strength of the bulls, and as long as Nifty sustains above 23,300, the prevailing momentum is likely to persist. Additionally, a close above the 20-day EMA and the RSI surpassing 50 indicate a resurgence in positive sentiment while minimizing downside risks, he said.

"The 23,300–23,350 zone serves as a crucial support backed by put writers. As long as Nifty stays above 23,300, buying opportunities are expected to emerge, favouring a "Buy-on-Dips" strategy. A decisive move above 23,550 could accelerate the rally, setting the stage for further gains in the upcoming sessions," Dhameja said.