Finance Minister Nirmala Sitharaman will present the Union Budget for fiscal year 2025-26 on 1st February 2025, marking her eighth consecutive budget presentation. The tradition of unveiling the annual financial statement on the first day of February will continue, with this year’s budget expected to address critical economic challenges.
- Capital Expenditure for FY 2026 is estimated to be ₹11.3 Trillion.
- The overall budget is estimated to be neutral and in continuation to previously announced budgets.
- There may be attempts to provide tax relief to the middle class with tax slab revisions and rebates.
Budget 2025: Date and Time
The Union Budget 2025 will be presented in the Parliament by Finance Minister Nirmala Sitharaman in a red bahikhata on Saturday, 1st February 2025. Her speech announcing the Union Budget 2025 will start at 11 AM in the Lok Sabha.
Why is the Union Budget Important?
All eyes will be on the upcoming Union Budget 2025, considering the direct and indirect impact it has on stock market investors and companies alike. Finance Minister Sitharaman will throw light on the government’s expenditure plans, disclose income sources for the country, announce important schemes for tax relief and comment on the overall economic health of India.
Announcements made on sectoral spends during the Union Budget 2025 will have an immediate chain effect on the benefiting companies and their share price. This is why investors closely follow the announcements made during the Union Budget.
Key Expectations from Union Budget 2025: Sectors and Stocks To Watch Out For
India’s Union Budget 2025 is expected to be neutral and in continuity to the previous budgets, with regards to capital spending, employment generation, controlling rural inflation and working on tax relief for the middle class. In lieu of the same, the following sectors could benefit from the budget announcement:
1. Defense: It is expected that this year’s defence expenditure could see a 8% spike in its YoY allocation(from the 13% allocation in Budget 2024), targeted towards procurement of defence equipment, aircrafts and aero engines for the Air Force and the Army. All key defense players like Hindustan Aeronautics Limited, Bharat Dynamics Limited, Bharat Electronics Limited and more could benefit from the same.
2. Railways: Railways had 5.3% of the total budget allocation in Budget 2024. Continuing the tradition, Railways could see a boost in its capex by 8-10% YoY in Budget 2025 as well. This expenditure is predicted to be redirected towards new Vande Bharat Trains, safety systems like Kavach and for rolling stocks (wagons, coaches, locomotives). Indian Railway Finance Corp, Rail Vikas Nigam Limited, Indian Railway Catering and Tourism Corporation (IRCTC), Titagarh Retail Shares and more could be impacted from the Budget 2025 announcements directed towards the Railways sector.
3. Infrastructure: With a ₹11.1 lakh crore or 0.8% of total budget allocation in Budget 2024, the government has placed a central emphasis on infrastructure development. As India strives to achieve the vision of a Viksit Bharat by 2047, Budget 2025 is also expected to keep its focus on infrastructure investment intact.
L&T, IRB Infra, NBCC, KEC International shares and more could see movement post the announcement.
4. Consumer Durables and FMCG: Given the government’s advocacy for Make in India products, there could be an increase in import duties on certain components. The prediction for an increase in the personal tax slab could also increase disposable income and subsequent demand for the category. This could benefit popular shares like Havells, Voltas, Bajaj Electricals, HUL, Dabur, Marico, GCPL, Nestle, Britannia, V-Mart Retail and more.
5. Building Materials and Real Estate: Given the Modi government’s focus on PM Awas Yojana Gramin that aims to deliver 20 million houses over the next 5 years at a budget of over ₹800 billion, brands like Kajaria, Finolex, Apollo and more could see share price fluctuations from the announcements made for this category. Additionally, there are also predictions of an increase in tax deduction limit against home loans and introducing incentives that encourage rental housing.
6. Power: Given project announcements for power addition pan India, the power sector is expected to see visibility and focus on growing renewable energy in the power segment. This could benefit popular brands like JSW, NTPC, RIL and more.
7. Telecom: Budget 2025 announcements could formally announce waivers by the government to relax the adjusted gross revenue(AGR) or the dues owed by telecom companies. This could have a positive outcome for key telecom players like Vodafone Idea and Bharti Airtel.
8. Hotels: Given the government’s active steps towards boosting domestic tourism, reducing GST and licensing, leading hotel companies like ITC hotels, Indian Hotels and more could benefit, apart from improving the overall supply of hotels in India.
9. Roadways: As India progresses towards the 40+kms/day construction milestone, the overall capex for this category is expected to be flattish at ₹2.8 Trillion, similar to the previous 2 years. The steady roadways targets could be beneficial for beneficiary stocks like IRB Infrastructure Developers, KNR Constructions, PNC Infratech, and more.
Expected Announcements for Tax Relief and Working Professionals
The soon to be announced budget is coming just 6 months after the last one, which was announced in July 2024 post the elections. Back then, the Finance Minister Nirmala Sitharaman announced a comprehensive review of the Income tax Act to make it easy to read and understand for all. For the same, The Central Board of Direct Taxes (CBDT) formed a committee and invited suggestions from taxpayers, where over 6500 suggestions were received. Since Sitharam aimed to close this review within 6 months, investors will be monitoring for the changes/solutions to be announced during the Union Budget 2025.
Additionally, during the last budget, the government also announced the Employment Linked Incentives and the Internship Scheme to encourage employment and the skilling of youth in the country. For the same, there are expectations from Budget 2025 to widen the social security benefits for the newer workforce via labour codes and pension payouts.
Indian Investors’ Expectations from Budget 2025
Investors of the Indian stock market will be closely monitoring Budget announcements by Sitharam in hope of the following:
1. Exemption Limit for Personal Income Tax: There is hope amongst the investor community that the government may increase the basic exemption limit for personal income tax, which could enhance disposable income and provide a much-needed boost to the economy.
2. Possible Increase in Customs Duty on Gold: Following a reduction in customs duty on gold in the previous Budget, gold imports surged, raising concerns about its impact on the trade deficit. Given the situation, the government might consider raising the basic customs duty on gold in Budget 2025 to curb rising imports.
3. Reducing Capital Gains Tax: Indian investors have been demanding a reduction in the capital gain tax for a long time. This stems from the belief that this reduction could uplift market sentiment. Though, it remains uncertain whether the government will implement it in Budget 2025.
Conclusion
As everyone gears up for the Union Budget 2025 to be announced on 1st February, it becomes crucial to separate short-term market noise from the bigger picture. Given stock valuations are particularly stretched during this time, one must remember to not take any hasty decisions. Rather, investors should focus on proper market research, compare stock fundamentals, and align their investments with their financial goals.
Sources: Budget Document, Screener, Antique Research | Data as of January 29, 2025
Disclaimer
This blog is for general/educational information purposes and is no way to be considered as advice, or recommendation for investment or otherwise.
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