Nifty FMCG jumps 4% after Finance Minister announces no income tax up to Rs 12 lakh in Budget 2025; ITC, Trent, Godrej Consumer stocks rally 7%

FMCG stocks were gaining traction in the lead-up to the 2025 Union Budget.

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26 Aug, 2025 12:21

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Consumer staples stocks rose after Finance Minister Nirmala Sitharaman announced that no income tax will be levied on income of Rs 12 lakh. This measures will boost consumption in the Union Budget 2025, as lower taxes will boost household income, which in turn raise the demand for consumer staple products.

She also stated that the new income tax regime will be simpler, with a special focus on benefiting the middle class.

At 1 pm, the Nifty FMCG index was higher by 4 percent, the most in seven months. Godrej Consumer Products, ITC, Varun Beverages and Hindustan Unilever soared, gaining up to 4 percent in trade. Other consumption stocks such as Trent, auto players like Maruti Suzuki, and jewellery major Kalyan Jewellers soared in trade.

"The Union Budget 2025 is clearly focused on stimulating consumer demand to accelerate growth while ensuring fiscal stability. With economic expansion slowing over the past two quarters, the newly announced measures aim to reignite momentum," said Shripal Shah, MD & CEO, Kotak Securities.

The government's focus on infrastructure and capex seems to be taking a hit due to political compulsions and freebie politics. With this modest increase the railways, defense, infrastructure and engineering is likely to take a hit. On the other hand, FMCG, Auto, and Consumer Durables are likely to be in the limelight going forward, said Apurva Sheth, Head of Market Perspective & Research, SAMCO Securities.

Consumer demand, especially from the middle and lower-middle classes, has been sluggish, slowing volume growth for FMCG firms, which struggled to reach double-digit growth in the first half of FY25. The mass-market segment, particularly in urban areas, has struggled in recent months due to high inflation, which has dampened consumption patterns and slowed sales growth for consumer companies.

However, FMCG stocks have been gaining traction in the lead-up to the 2025 Union Budget, as the sector eagerly awaited measures from the Finance Minister aimed at stimulating demand and spurring consumption growth.

Market experts had emphasised that the Budget should prioritise simplifying income tax structures in a manner that could increase disposable incomes, besides enhancing rural infrastructure, and expanding direct benefit transfer programs. These measures could help revive consumer spending, particularly in the FMCG sector.

A 5–7 percent rise in disposable income for middle-income households is projected to result in a 6 percent increase in consumer spending on essential goods, directly contributing to a 0.7 percent GDP growth, according to market experts.