On February 3, the Indian stock market faced sharp losses, with the Sensex plunging 750 points to an intraday low of 76,791.09 and the Nifty 50 slipping 1% to 23,222. The sell-off was driven by a combination of weak global cues and concerns over the reduced focus on infrastructure spending in the Union Budget 2025.
Broader Market Sees Deeper Losses
The broader markets mirrored this downtrend, with the BSE Midcap and Smallcap indices falling over 1% each as investors reassessed their positions post-Budget amidst a deteriorating global economic outlook.
Key Takeaways from Union Budget 2025
One of the standout announcements in the Union Budget 2025 was the increase in the income tax exemption limit under the new tax regime to ₹12 lakh, exceeding expectations of a ₹10 lakh cap. This move aims to boost consumption, savings, and investments, offering relief to middle-class taxpayers.
However, investor sentiment was dampened by the government’s reduced focus on infrastructure capital expenditure (capex) for FY25. The initial target of ₹11 lakh crore was cut to ₹10.18 lakh crore due to delays in project execution. Despite this, analysts maintain a positive outlook for consumption-driven sectors, expecting them to benefit from the tax relief measures.
Global Headwinds Add to Market Pressure
Global factors also contributed to the market’s weakness. Former US President Donald Trump’s announcement of new tariffs on Canada, Mexico, and China reignited trade war fears. Additionally, the strengthening of the US dollar and sustained foreign investor outflows further weighed on market sentiment.
Looking ahead, investor focus will shift to the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting scheduled this week. Market participants are anticipating a 25 basis point rate cut to support economic growth and consumer demand.
Expert Insights: Market and Technical Outlook
Ajit Mishra, SVP – Research, Religare Broking Ltd.
Markets displayed high volatility during the Union Budget’s special trading session, closing flat after recent gains. The Nifty 50 initially showed strength but failed to break past the key resistance at the 200-day exponential moving average (DEMA), settling at 23,482.15.
Sector-wise, FMCG, auto, and real estate stocks saw buying interest, driven by Budget-related tax reliefs, while defence, energy, and infrastructure sectors faced selling pressure.
In the near term, the Nifty 50 is expected to consolidate around current levels, with a breakout above the 200 DEMA at 22,620 being critical for upward momentum. As earnings season approaches, selective stock picking will be key for traders.
Rupak De, Senior Technical Analyst, LKP Securities
The Nifty 50 experienced sharp intraday swings during the Budget session, forming a small-bodied candle on the daily chart, indicating indecision among market participants.
The index has support at 23,280, and as long as it holds above this level, the broader trend remains positive. On the upside, Nifty could target 23,700–24,000. However, a break below 23,280 could trigger a deeper correction, leading to panic-driven selling.
Geojit Financial Services
While the post-Budget closing remained relatively stable, heightened volatility throughout the day led to a decline in stocks trading above their 10-day Simple Moving Average (SMA). Geojit suggests that dips towards 23,400 could present buying opportunities, with the potential for a rebound towards the 23,700–23,840 range. However, a drop below 23,190 could invalidate the bullish outlook, opening the door for further downside.
Conclusion
The Indian stock market remains under pressure due to a combination of global uncertainties, Budget-related concerns, and cautious investor sentiment. While the increase in the income tax exemption limit is viewed as a positive, worries over reduced infrastructure spending and external market risks continue to weigh on near-term market performance.
The upcoming RBI policy meeting will be a key event, with a potential rate cut offering some relief to both consumers and the markets. In the meantime, traders should focus on sector-specific trends and key technical levels, as the Nifty 50 is likely to consolidate before making its next decisive move.
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