As Budget Day approaches on February 1, 2025, all eyes are on Mrs Nirmala Sitharaman, our Finance Minister, who will unveil the government’s financial blueprint for the coming year. Budget Day has always been a significant event for businesses, investors, and the general public alike. In this blog, we’ll cover why it’s important, analyze market performances post-budget over the past five years, revisit key highlights from last year’s budget, and discuss the potential impact of this year’s budget on the economy and key industries.

Why Is Budget Day Important?

The Union Budget is more than just a financial statement; it’s the government’s roadmap for the country’s economic growth. It outlines revenue sources, expenditure priorities, and policy reforms that shape sectors and influence individual livelihoods. For investors, it’s particularly crucial as budget announcements often create ripples across stock markets, with reforms affecting everything from taxation policies to infrastructure development.

On Budget Day, the Finance Minister provides clarity on fiscal deficit targets, tax reforms, and sectoral allocations, which directly influence market sentiment and help investors make informed decisions.

Market Performances Post-Budget: Nifty and Sensex in the Last 5 Years

1. Budget 2020 (February 1, 2020):

  • Sensex: Closed at 39,735.53, declining by 987.96 points (−2.43%).
  • Nifty 50: Ended at 11,661.85, down by 300.25 points (−2.51%).

Analysis: The market reacted negatively due to the absence of significant stimulus measures and concerns over the fiscal deficit.

2. Budget 2021 (February 1, 2021):

  • Sensex: Surged by 2,314.84 points (+5%) to close at 48,600.61.
  • Nifty 50: Jumped by 646.60 points (+4.74%) to settle at 14,281.20.

Analysis: Investors responded positively to the pro-growth budget, which emphasized increased capital expenditure and healthcare spending without introducing new taxes.

3. Budget 2022 (February 1, 2022):

  • Sensex: Rose by 848.40 points (+1.46%) to end at 58,862.57.
  • Nifty 50: Gained 237 points (+1.37%) to close at 17,576.85.

 Analysis: The market appreciated the budget's focus on infrastructure development and digital initiatives, leading to a positive uptick.

4. Budget 2023 (February 1, 2023):

  • Sensex: Closed at 59,708.08, up by 158.18 points (+0.27%).
  • Nifty 50: Declined by 45.85 points (−0.26%) to settle at 17,616.30.

Analysis: The mixed market response was influenced by external factors, including global economic uncertainties and specific domestic issues.

5. Budget 2024 (February 1, 2024):

  • Sensex: Dropped by 106.81 points (−0.15%) to close at 71,645.30.
  • Nifty 50: Fell by 28.25 points (−0.13%) to end at 21,697.45.

Analysis: The market's marginal decline was attributed to profit-taking by investors amid mixed cues and cautious sentiment.

Key Highlights of the 2024 Union Budget

The 2024 Union Budget, presented by Finance Minister Nirmala Sitharaman, focused on stimulating economic growth, job creation, and maintaining fiscal discipline. Notable announcements included:

  • Job Creation Initiatives: A ₹1.97 Lakh Crore expenditure plan was unveiled to create jobs over the next five years, with a focus on manufacturing and rural development.
  • Support for Women and MSMEs: The budget introduced measures to support women entrepreneurs and the Micro, Small, and Medium Enterprises sector, aiming to boost inclusive growth.
  • Agriculture and Rural Development: Investments were announced for climate-resistant seeds, digital infrastructure, and e-commerce to enhance agricultural productivity and rural incomes.
  • Capital Gains Tax Adjustments: The budget proposed increases in capital gains tax rates, aiming to enhance revenue without significantly impacting investment sentiment.
  • Fiscal Discipline: A commitment was made to reduce the fiscal deficit to 4.9% of GDP, balancing welfare spending with fiscal sustainability.

 

Predicted Impact of the 2025 Budget on the Economy

As the government focuses on balancing growth and fiscal discipline, the 2025 budget is expected to:

Boost Infrastructure: Increased allocation for roads, railways, and urban development.

Enhance Domestic Manufacturing: Further incentives under the Production Linked Incentive (PLI) scheme.

Support Green Initiatives: Greater emphasis on renewable energy and sustainable practices.

Ease Tax Burden: Potential reduction in personal income tax slabs to boost consumption.

Focus on Financial Inclusion: Policies aimed at increasing credit access in rural areas.

These reforms could accelerate GDP growth and create more opportunities across sectors.

Top 5 Sectoral Impact Expectations from this Budget

Banking and Finance

  • Expected increase in credit disbursements for MSMEs and rural sectors.
  • Emphasis on fintech innovations and digital banking.

Technology

  • Significant allocation for AI, blockchain, and cybersecurity to enhance India’s digital ecosystem.
  • Incentives for startups working in emerging tech fields.

Healthcare

  • Expansion of the National Health Mission with increased funding.
  • Incentives for pharmaceutical R&D and medical device manufacturing.

Real Estate

  • Likely tax benefits on housing loans to revive demand.
  • Increased allocation for affordable housing projects.

Renewable Energy

  • Higher budgetary outlay for solar, wind, and hydrogen energy projects.
  • Policies encouraging private investment in green energy.

Conclusion

Budget Day isn’t just about numbers; it’s about shaping the nation’s future. For investors, it’s a time to recalibrate strategies based on emerging opportunities and policy shifts. As February 1 approaches, stay informed and analyze how the announcements could impact your portfolio.