Synopsis
The Indian stock market is currently evaluating two significant policy changes: the Union Budget 2025, which introduced tax cuts to enhance consumption and investment, along with the RBI's 25 bps rate cut indicating a move towards monetary easing, as per expert analysis.Key Takeaways
- Union Budget 2025 introduces tax cuts.
- RBI cuts repo rate by 25 bps.
- Fiscal deficit target set at 5.3% of GDP for FY26.
- Nifty 50 rises 1%, while Sensex drops 198 points.
- Increased disposable income expected to stimulate spending.
Mumbai, Feb 8 (NationPress) The stock market experienced two significant policy initiatives this week that could greatly influence India's economic direction — the Union Budget 2025, which introduced tax reductions aimed at enhancing consumption and investment, and the RBI’s 25 bps rate reduction, indicating a transition towards monetary easing, experts noted on Saturday.
These initiatives are designed to bolster economic growth while upholding fiscal discipline. In market performance, Nifty 50 rose by 1 percent, Nifty Midcap increased by 0.9 percent, and Smallcap index gained 0.7 percent.
However, the Indian stock market ended lower on Friday as investors continued to evaluate the RBI's Monetary Policy Committee (MPC) decision to lower the repo rate by 25 basis points.
The central bank, however, maintained its policy stance with a neutral outlook. The MPC opted to cut the repo rate from 6.5 percent to 6.25 percent.
The Sensex ultimately closed at 77,860, decreasing by 198 points. The Nifty index saw fluctuations between 23,694 and 23,443, before finishing at 23,560, down 43 points.
As per Krishna Appala of Capitalmind Research, the Budget has provided much-needed tax relief, putting more disposable income in the hands of consumers.
Those earning over Rs 24 lakh per year will save an additional Rs 1.1 lakh annually, while individuals earning up to Rs 12 lakh will effectively incur no income tax.
“With approximately Rs 1 lakh crore anticipated to re-enter the economy due to these tax cuts, the initiative is likely to promote increased discretionary spending and savings,” said Appala.
In spite of these tax reductions, the government has preserved its fiscal consolidation efforts, establishing the FY26 fiscal deficit target at 5.3 percent of GDP, down from 5.8 percent in FY25.
In conjunction with the fiscal measures, the RBI’s decision to lower the repo rate by 25 bps to 6.25 percent signifies the onset of a probable rate-cut cycle after more than two years of stable policy rates.
This follows a 50 bps CRR cut in December 2024 and a Rs 60,000 crore bond purchase program, all aimed at enhancing liquidity within the banking system.
Hrishikesh Yedve of Asit C Mehta Investment Intermediates Ltd (part of the Pantomath Group) remarked that on the weekly chart, the index has created a green candle, confirming last week's bullish engulfing pattern.
“On the downside, immediate support for the Bank Nifty is at 49,650, while 50,600 will act as resistance on the upside. Traders should keep a close eye on these levels for potential trading opportunities. However, considering the weekly formation, a buy-on-dips strategy should be adopted in Bank Nifty,” he added.
