Current Situation of Stock Market and Budget Expectations in 2025

 

Chandigarh University - The Indian stock market, as we enter 2025, continues to be shaped by a blend of global and domestic factors. With the Union Budget for 2025 around the corner, the market is abuzz with speculation on fiscal measures that could drive economic growth and influence investment sentiment. In the Indian context, such crashes can result from a combination of global economic turmoil, domestic financial instability, or a sudden shift in investor sentiment. Panic selling, triggered by fear, often amplifies the downfall, further depressing market indices like the BSE Sensex and NSE Nifty. A stock market decline can result from major disasters, economic crises, or the collapse of market manipulation. A stock market crash refers to a sharp and unexpected decline in the prices of shares listed on stock exchanges.

Current Stock Market Scenario

1. Global Influences
• Economic Challenges: Ongoing geopolitical tensions, supply chain disruptions, and fluctuating commodity prices continue to impact global markets.
• Interest Rate Dynamics: The US Federal Reserve's stance on interest rates remains a critical factor affecting foreign portfolio investments in India.
2. Domestic Market Highlights
• Indices Performance: The Sensex and Nifty 50 are trading near historic highs, backed by strong corporate earnings in key sectors such as technology, financials, and energy.
• Sectoral Trends:
• IT & Pharma: Strong performers due to global demand for digital transformation and healthcare innovation.
• Banking & Financials: Benefit from rising credit growth and stable asset quality.
• Manufacturing & Infrastructure: Await targeted government support to overcome headwinds like high input costs.
• Retail Participation: Retail investors continue to be a driving force, with systematic investment plans (SIPs) crossing new milestones.
3. Volatility Factors
• Inflation Concerns: Though easing, inflationary pressures still pose risks to consumer spending and corporate margins.
• Market Valuations: High valuations in certain sectors may lead to profit-booking and increased volatility.

Budget Expectations for 2025

The Union Budget is expected to focus on fostering economic growth, addressing inflation, and supporting key sectors, which could directly influence market performance.

1. Tax Reforms

• Income Tax Relief:
• Increase in basic exemption limits or restructuring of tax slabs to boost disposable incomes.
• Enhanced deductions for savings, investments, and home loans.
• Corporate Tax Adjustments:
• Startups and MSMEs seek further tax incentives and simplified compliance measures.

2. Capital Markets

• Securities Transaction Tax (STT): Investors expect a reduction or rationalization of STT to make trading more cost-effective.
• Capital Gains Tax: Simplification of tax structures for long-term and short-term capital gains could encourage retail and institutional participation.
• Incentives for REITs and InvITs: Support for real estate and infrastructure-focused investment vehicles to attract long-term investments.

3. Infrastructure Development

• A significant increase in allocations for roads, railways, renewable energy, and housing projects is anticipated to fuel economic growth and create jobs.
• Policy initiatives to fast-track the National Infrastructure Pipeline (NIP).

4. Green Economy & ESG Focus

• Incentives for renewable energy projects, electric vehicles (EVs), and green hydrogen production are likely to align with India’s commitment to sustainable development.

5. Digital and Tech Economy

• Continued support for sectors like fintech, artificial intelligence, and 5G infrastructure to position India as a global tech hub.
• Policy measures to bolster startups and digital entrepreneurship.

6. Rural and Agri Sectors

• Focus on rural development through increased funding for irrigation, rural roads, and welfare schemes.
• Incentives for agri-tech and sustainable farming practices.

The stock market's response to the Union Budget will hinge on the government's ability to balance fiscal prudence with growth-oriented measures. Key factors to watch include:

• Clarity on fiscal deficit targets.
• Measures to boost consumption and investments.
• Reforms that attract foreign direct investment (FDI) and enhance ease of doing business.

While a well-balanced budget could propel market indices to new highs, failure to meet investor expectations might lead to short-term corrections. The stock market in 2025 reflects cautious optimism, driven by robust earnings and retail participation but tempered by global uncertainties. The Union Budget will be a pivotal event, potentially setting the tone for economic policies and market trends for the rest of the year. Investors should remain vigilant, focusing on sectors likely to benefit from budgetary measures, while maintaining a diversified portfolio to navigate potential volatility.