Budget 2025 a key trigger for Indian stock market, say experts—key measures that could boost sentiment | Stock Market News

The Indian stock market is experiencing a rough phase amid signs of slowing economic growth, foreign capital outflow, and uncertainty surrounding the US Federal Reserve’s interest rate path and Donald Trump’s trade policies.

Amid multiple headwinds and global uncertainty, all eyes are on the Union Budget 2025, which experts expect to strike a balance between capital expenditure to spur growth and fiscal consolidation.

Finance Minister Nirmala Sitharaman will unveil the second full-fledged budget of the Modi 3.0 government on February 1.

Nilesh Shah, MD of Kotak Mahindra AMC, underscored that the Budget is coming as the world moves from globalisation to protectionism, and tariffs are becoming an essential part of the policy. So, it needs to be growth-oriented, with support for urban consumption through tax cuts and incentives for private investment.

At the same time, Shah believes the Budget can’t afford to deviate from its path of fiscal prudence. He said divestment, including strategic divestment of non-core PSUs, will help bridge the fiscal gap.

Budget 2025: What can cheer the market?

Experts believe that if the government announces measures to boost consumption, accelerate manufacturing, and create more jobs, it can boost market sentiment.

There are high expectations that the government will pursue income tax reforms and even announce changes in tax rates. This would leave more disposable income in the hands of consumers, a significant boost for consumption and economic growth.

Besides, higher funds for infrastructure projects, increased divestment targets, steps to ensure fiscal consolidation, and measures to facilitate the growth of startups will be significantly positive in the long term for the economy and the markets.

Rationalising capital gains taxes and lowering tax rates on long-term capital gains will also be positive for market sentiment. 

“Some of the key demands for the rationalization of capital gains tax include lowering tax rates on long-term capital gains, revising the thresholds for LTCG tax, enhancing indexation benefits, increasing threshold limits of deductions like 54, 54F, etc., and other similar measures,” said Sofiya Syed, Direct Tax Division, Dewan P.N. Chopra & Co.

Trivesh D, COO of Tradejini, believes that in Budget 2025, the government will likely aim to strike a balance between public expectations and the practical realities of fiscal management.

Although the chances are less, Trivesh believes one key market-friendly measure could be the restoration of old securities transaction tax (STT) rates for futures and options—potentially reducing them to 0.0625 per cent for options and 0.0125 per cent for futures.

“Reducing the 15 per cent capital gains tax may also encourage short-term investments. At the same time, targeted support for small businesses, rural job creation, and sustainable initiatives such as renewable energy and electric vehicles could address immediate challenges while encouraging long-term economic resilience,” said Trivesh.

According to Sreeram Ramdas, Vice President at Green Portfolio PMS, an allocation above 2.95 trillion in capital expenditures would be aggressive.

Ramdas believes that since the debt-to-GDP ratio and interest costs are on an uptrend, coupled with dwarfing GDP growth, this budget will place more emphasis on BOT (build-operate-transfer) and HAM (hybrid annuity model) projects rather than EPC (engineering, procurement, and construction), as the former types require much lesser capex outlay.

According to Anirudh Garg, Partner and Fund Manager at Invasset PMS, markets would respond positively to budgetary measures that drive economic growth, fiscal sustainability, and business efficiency.

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