Analysts do not expect a significant rally in the Indian stock markets before the presentation of the Union Budget 2025 on February 1, 2025. Investor sentiment is subdued, with attention shifting towards President Trump's early policy actions and the performance of corporate earnings for Q3FY25. Rupen Rajguru, head of equity investment and strategy at Julius Baer India, suggests that market expectations are low, particularly given the sluggish earnings season so far. This environment does not indicate a pre-budget rally, as markets are more likely to respond to external factors, such as a weakening dollar index or less aggressive trade measures from President Trump.
Rajguru notes that the market could see a marginal rally if factors like a softer dollar or supportive policies from Trump emerge in the early days of his presidency. However, he emphasizes that a post-budget rally is more likely if the government's budget proposals meet or exceed market expectations. A potential relief on the taxation front, for example, could trigger such a rally, given the low expectations heading into the event.
From a policy perspective, analysts anticipate some tax rationalization in the Budget 2025, though they do not expect large tax cuts. They also foresee measures to boost exports, improve coordination between the central and state governments for capital expenditure, extend employment-linked benefits, and offer more clarity on the structural reforms being pursued by the government. Weak equity market performance in recent months could affect the government's capital gains tax revenue, which might push tax buoyancy lower after several years of strong growth.
Overall, while the market is unlikely to rally significantly in the run-up to the Budget, analysts suggest that the Budget presentation itself could spark a positive market response if the government introduces tax relief and other investor-friendly measures.
