Will the BSE and the NSE soar to a new height or will there be another blood bath at Dalal Street after Finance Minister Nirmala Sitharman presents the Union Budget 2025 to the Parliament?

The stock markets in India have witnessed falling prices most of the days in the new year.

The stock markets started the year 2025 on a note of caution with Foreign Institutional Investors or FIIs offloading domestic stocks worth more than Rs 3,000 crore in the first week itself.

Will Dalal Street Witness Bloodbath?

There were certain technical corrections and the prices went up temporarily for profit-taking.

As the Union Budget 2025 is approaching, and India Inc. hopes for a disciplined, pragmatic, and pro-reform budget, all eyes are set on the Finance Minister.

Also Read: Rupee Hits Record Low, Sensex Tumbles: How Will Sitharaman Navigate Budget Amidst Global Pressures?

The government has adopted the policy of simplifying the tax regime, reducing rates and giving relief to taxpayers to some extent in recent years, the question being popped up is- what will the Finance Minister do this year to boost the sentiment of the market?

Will Nirmala Sitharaman Slash Income Tax?

The Confederation of Indian Industries (CII) has demanded to slash the Income Tax rates, arguing that an additional amount of money left with the salaried class may push consumption that may boost the Indian economy.

Similarly, almost all industries have demanded to cut the corporate tax and streamline the GST so that consumption may go up.

However, as the government has indicated on slashing the fiscal deficit and keeping it within the limit of 4.5% of the GDP, she may not be able to do so.

Also Read: Union Budget 2025: IMF Highlights Weak Indian Economy, Nirmala Sitharaman Prepares Bold Moves

If the income tax rates are slashed the standard deduction is increased, corporate tax is reduced or tariffs are brought down, the Indian stock market may soar.

Budget Allocations

All eyes will be set on the budget allocations for certain sectors. Experts believe the stock market will be happy and the indices like the BSE and the Nifty 50 may soar to a new height if budget allocations for infrastructure development, green energy, technological innovation and startups are increased.

Experts believe Nirmala Sitharaman is most likely to increase the allocation for green energy and startups. This may boost the optimism of not only these sectors but the entire market sentiment.

Fiscal Deficit

Experts, market watchers and economists will also keep an eye on Nirmala Sitharaman when she announces the total projected fiscal deficit.

Also Read: Union Budget 2025: Will Nirmala Sitharaman Simplify GST, Increase MNREGA Wages?

If she signals a lower fiscal deficit, the stock market players will be happy hoping for prudent government borrowing. It may also reflect fiscal discipline, enhancing investor confidence in the economy.

A reduced fiscal deficit may also reduce pressure on the bond markets,and keep interest rates stable. Lower interest rates are considered good for equity valuations, they support better growth prospects for businesses and higher stock prices.

The union government has already projected a redcued fiscal deficit of 4.9% for FY 2024-25. It has also planned to bring it down to 4.5% for the FY 2025-26.

Will she be able to do it? The BSE and the NSE will behave much to what the Finance Minister announces in the budget projections.

FIIs, FDIs Are Watching

The FIIs and the Foreign Direct Investors (FDIs) will also closely monitor the Union Budget 2025 as the policy decisions announced by Nirmala Sitharaman will be crucial for their decisions and further actions.

They will be happy if the Finance Minister relaxes FDI norms, announces sector-specific incentives, and reforms the tax regime. Besides, they will also be happy if sops are announced for infrastructure development and green energy initiatives.

The FIIs and the FDIs have pinned hopes on these sectors as they promise good returns.

On the other hand, announcements like increased tax burdens or higher compliance requirements on foreign investors may disappoint them.

As Nirmala Sitharaman will have to take a tightrope walk, she does not have too much leverage. Reduced fiscal deficit also means less money and less allocations, increased tax burden and reduction in sops.

Dalal Street must be watching anxiously.