India Stocks: Indian shares drop as government's lower spending plan outweighs budget's tax cut relief

NBCC (India)

01/02/2025 08:27

(Updates to incorporate markets reaction to union budget
announcements)
    By Bharath Rajeswaran
       Feb 1 (Reuters) - Indian shares fell on Saturday, led by
infrastructure-related stocks after the government only modestly
raised its capital expenditure budget, although the losses were
limited by a jump in consumption-linked sectors after a cut to
income tax.
    The Nifty 50  .NSEI  was down 0.27% at 23,447.65 points as
of 1:28 p.m. IST in a special trading session, while the BSE
Sensex  .BSESN  had shed 0.14% to 77,372.74.
    Finance Minister Nirmala Sitharaman, in the annual budget,
set India's capex outlay at 11.2 trillion rupees (about $130
billion) for 2025-26, a modest increase from 2024-25, which
Sandeep Nayak, CEO of retail broking at Centrum Broking, said is
a "mild negative."
    That put pressure on industrial and infrastructure firms.
Larsen & Toubro (L&T)  LART.NS , PNC Infra  PNCI.NS  and NBCC
 NBCC.NS  dropped about 4% each, with L&T the top Nifty loser.
    "The budget fell short on government allocation, which has
led to a drop in capital goods, engineering and infrastructure
companies, weighing on markets," Gaurav Dua, senior vice
president, head of capital markets strategy at Mirae Asset
Sharekhan.
    Sitharaman, though, also unveiled plans to cut income taxes,
a relief for a country struggling with slowing consumption.
    Consumption-linked sectors such as fast-moving consumer
goods  .NIFTYFMCG  rose 4.4%, while auto  .NIFTYAUTO  and realty
 .NIFTYREAL  gained 2.1% and 2.2%.
    Trent  TREN.NS , Maruti Suzuki  MRTI.NS , Britannia
 BRIT.NS , Hindustan Unilever  HLL.NS  and Tata Consumer
 TACN.NS  were the top boosts to the Nifty 50.
    "With the economy in a slowdown and considering the low
consumption demand, the tax relief by the government is a big
relief and would boost demand and consumption," said Divam
Sharma, co-founder and fund manager at Green Portfolio.
    Ten of the 13 major sectors declined, while the more
domestically focussed mid-cap  .NIFMDCP100  and small-cap
 .NIFSMCP100  indexes shed about 0.6% and 0.9%, respectively.
    Sharekhan's Dua, however, said the budget was broadly in
line with expectations, giving the markets leeway to take a
pause after gaining about 3% in the four sessions leading up to
the budget.
    Among other stocks, pipe makers gained as the government
extended a scheme to enhance water supply until 2028.
    Fertiliser companies advanced after the government announced
a further increase in urea supply.    
    Footwear makers rose on policy plans to support the leather
industry, while tourism-linked companies gained on plans to
develop top destinations with key infrastructure.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Performance of India's key stock indexes since last budget    https://reut.rs/40wpFVm
Monthly FPI outflows from Indian shares rise to second highest
level on record    https://reut.rs/3Edyr38
Trajectory of India's Nifty and Sensex since hitting record high
levels    https://reut.rs/4hiPD5M
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Savio
D'Souza, Eileen Soreng and Sonia Cheema)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))