Stock markets slide post Budget presentation as investor concerns loom large

The stock markets reacted negatively to the Union Budget 2025 presented by Finance Minister Nirmala Sitharaman on Saturday, February 1 as key concerns of higher rates pertaining to capital gains tax remained unaddressed.

The BSE Sensex rose at the start of trading on Saturday prior to the Budget announcement but post-presentation, it was down 0.47%, or 363 points, down at 1:15 pm. Similarly, the Nifty 50 was down 0.68%, or 163 points, as of 1:16 pm.

The investors were hoping for a reversal in the securities transaction tax (STT) rates on short-term capital gains (STCG) and long-term capital gains (LTCG). The government had hiked the tax on STCG to 20% from 15% and in the case of LTCG, it was increased to 12.5% from 10%, as proposed by Sitharaman in the Budget 2024-25 speech made in July last year.

Also, the market was also expecting that there would be measures to improve the flow of foreign institutional investors (FIIs), however, they were disappointed.

From a broader context, the market reacted negatively to the news on capital expenditure allocation. As of now, there is no hike in capital expenditure, which is likely to have a bearing on the overall economic growth.

However, the announcement by the Finance Minister on removing the income tax payable income up to Rs 12 lakh has boosted the stock prices of companies consumer-focused like those in the FMCG segment, automobile manufacturers etc.

Over the last week, the stock market witnessed a steady increase in the hopes that the Union Budget would usher in measures to attract further investments.