Sensex, Nifty marginally lower as govt's muted spending plan offsets tax cut relief in Budget; FMCG, realty shine

India VIX, a barometer to assess market anxiety slipped nearly 10 percent to fall below the 15 level.

Markets turned volatile on February 1 as Nifty and Sensex slipped into the red after Finance Minister Nirmala Sitharaman scaled down capex for FY25 to Rs 10.18 lakh crore from Rs 11.11 lakh crore. However, investor sentiment found some support as she announced no income tax on annual earnings up to Rs 12 lakh. India VIX, a key gauge of market anxiety, dropped over 12 percent, falling below 15.

The broader market comprising mid-small cap indices, however, continued to trade lower by 0.3 and 0.1 percent, respectively.

At about 2:40 pm, the Sensex was up 39.60 points or 0.05 percent at 77,540.17, and the Nifty was down 21.85 points or 0.09 percent at 23,486.55. About 1,870 shares advanced, 1,593 shares declined, and 109 shares unchanged.

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"There are three key points. First, tax revenue growth at 11 percent and GDP growth at 10 percent indicate realistic numbers without excessive optimism. Second, the budget’s focus on boosting mid-scale urban and low-income consumption—impacting nearly two-thirds of taxpayers—could drive a significant revival in spending," Aishvarya Dadheech, CIO and Founder of Fident Asset Management said.

However, the market was not enthusiastic about a slowdown in capex. Expectations were above Rs 2 lakh crore, but the revised estimate stood at Rs 11.21 lakh crore, a modest 10 percent increase. Additionally, higher-than-expected gross borrowing contributed to market volatility. The true impact on debt markets, including possible yield hardening, would become clearer on Monday.

He added that in terms of sectoral impact, the budget favours consumption, agriculture, agrochemicals, AI, renewables, and nuclear energy. However, lower-than-expected allocations for defence, railways, and capex could put pressure on cement and capital goods stocks. The budget’s consumption tilt is beneficial in the short term, but long-term growth depends on sustained capex.

However, in a bid to provide relief to the middle class, the FM said that no income tax would be payable on annual earnings up to Rs 12 lakh—a move aimed at boosting consumption, savings, and investments. She added that the budget focuses on unlocking the nation’s potential, with a special emphasis on women, youth, farmers, and the poor.

Among sectors, Nifty FMCG, Auto and Realty rallied over 3 and 2 percent respectively. Nifty Bank, Energy, Infra, IT and Metal all nosedived over 1 percent each. Nifty Bank and PSU Bank index slipped up to 1.7 percent.

Consumer staple stock rallied after Nirmala Sitharaman announced that no income tax will be levied on income of Rs 12 lakh. These 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.

Both four-wheeler and two-wheeler stocks gained rallied on February 1 after the Union Budget 2025 introduced measures to accelerate electric vehicle (EV) adoption and ramp up infrastructure. Finance Minister Nirmala Sitharaman announced a slew of initiatives to build an ecosystem for solar PV Cells & EV Batteries.

Agri stocks jumped up to 9 percent after the Finance Minister unveiled measures in the Union Budget 2025 aimed at boosting crop diversification, irrigation facilities, and credit availability for farmers. Additionally, Sitharaman announced a mission to achieve self-reliance in pulses in the next six years. PM Dhan Dhanya Krishi Yojana will cover 100 districts to enhance agri productivity, adopt crop diversification, adopt sustainability, enable post-harvest storage at block level, improve irrigation, facilitate long- and short-term credit and will help 1.7 crore farmers, said FM Nirmala Sitharaman.

A host of hotel and tourism stocks rallied up to 5 percent on February 1 after FinanceMinister Nirmala Sitharaman announced a slew of measures that would give boots to the sector in the coming year. "We will focus on tourism for employment-led growth and Top 50 tourist destinations will be developed in partnership with states," Nirmala Sitharam said during her budget speech. She added that a special emphasis will be given to the destinations of Lord Buddha.

From a technical standpoint, Sameet Chavan of Angel One said that the 20-DEMA around 23,400-23,350 is to be seen as intermediate support, but on such events, one must anticipate wild swings. Additionally, strong foundational support appears to be positioned around the 23,100-23,000 zone, followed by the lower band of the ‘Falling Wedge’ around 22,800, which one must keep in mind if things go haywire. "On the flip side, the upper band of the ‘Falling Wedge’ near 23800, followed by 200 SMA at 24000 is likely to serve as key hurdles and a decisive surpass on a closing basis, is highly likely to form a short-term bottom for the markets," he added.

Trent, Maruti Suzuki, Tata Consumer Products, Eicher Motors and Asian Paints were the top gainers on the Nifty. BEL, Larsen and Toubro, Power Grid, HDFC Life Insurance and Cipla were the major laggards.