By Achin Goel
Indian stock market outlook will be determined by the interplay of domestic fiscal policies as well as the Budget 2025 and international trade dynamics, particularly in light of the recent inauguration of Donald Trump as the US President.
Trump’s return to office introduces a layer of uncertainty regarding US trade policies that may affect Indian exports, particularly in pharmaceuticals and IT services, where tighter regulations could increase operational costs. However, we believe that Trump’s administration may inadvertently benefit India by displacing supply chains from China, potentially leading to increased foreign investments in India.
As India approaches the Union Budget 2025, set to be unveiled on February 1, expectations are high regarding potential reforms that could significantly impact various sectors and influence long-term investment strategies. With a backdrop of global economic uncertainties and domestic fiscal challenges, the budget is anticipated to focus on economic growth, consumer relief, and infrastructure development.
Key Expectations From Union Budget 2025
There is a strong push for increased tax exemption limits and rebates, particularly for middle-income taxpayers. We believe basic tax exemption limit under the new regime is expected to rise from Rs 3 lakh to Rs 5 lakh, while the rebate limit may increase from Rs 7 lakh to Rs 10 lakh. Such changes could enhance disposable income, thereby stimulating consumer spending and investment across sectors.
A substantial increase in capital expenditure is anticipated, with allocations for infrastructure projects likely to reach around Rs13-15 lakh crore. This includes significant funding for railways and road networks, which are crucial for boosting economic activity and connectivity. Enhanced infrastructure spending typically has a multiplier effect on GDP growth, making it a pivotal area for long-term investors to watch.
The government is expected to introduce measures that support emerging sectors such as renewable energy, electric vehicles (EV), artificial intelligence (AI), Nuclear Technology, and telecom. Also, increased budgetary allocations for green technologies and incentives for FDI in insurance could create new opportunities for investors.
Potential Impact On Sector-Wise Long-Term Investments
Real Estate: With expectations of increased deductions for home loan interest payments and potential reforms aimed at reducing taxes on homebuyers, the real estate sector could see a resurgence. Investors might consider this sector as favorable due to improved affordability and demand driven by enhanced disposable income.
Railways sector: The Railway sector is significantly high with 15-20 per cent higher capital expenditure to over Rs 3.0 lakh crore from Rs. 2.62 Lakh crore in the last budget. The investment is expected to focus on several key areas, including network decongestion, safety enhancements through advanced systems like Kavach, and the introduction of new trains such as the Vande Bharat sleeper and Amrit Bharat Express. The budget is also expected to allocate substantial resources for modernising existing infrastructure, upgrading railway stations, and expanding the rail network, which currently spans 68,000 km.
Telecom and Digital Infrastructure: As the government emphasises digital transformation and infrastructure development in telecom, investments in this sector could yield significant returns. The introduction of financial incentives for telecom infrastructure could attract private investments, making it an attractive area for long-term investment strategies.
Also Read : Budget 2025 Expectations: Defence Sector Rallies For Continued Focus On Domestic Production, R&D Funding
Renewable Energy: With a focus on sustainability and meeting ambitious energy targets, investments in renewable energy sources such as solar and wind are likely to be prioritised. Government incentives aimed at promoting domestic manufacturing in this sector can create lucrative investment opportunities for investors. India has an ambitious plan to achieve a renewable energy capacity of 500GW by 2030 (from 200GW currently) from non-fossil sources, including solar, wind, and hydroelectric power through ongoing investment and technological advancements.
Consumer Goods: The consumer sector stands to benefit from tax reforms aimed at increasing disposable income. Enhanced support for small retailers and e-commerce initiatives could drive growth in this sector. Investors may find value in companies that are well-positioned to capitalize on increased consumer spending.
EV Sector: The budget is likely to prioritise the development of charging stations, especially in tier-2 and tier-3 cities and rural areas, where access is currently limited. Financial support mechanisms such as Viability Gap Funding (VGF) may be introduced to encourage private investment in these underserved regions. This is essential for building consumer confidence and facilitating the widespread adoption of electric vehicles.
Nuclear Technology: The investment is expected to augment the R&D related to advanced nuclear technologies, including small modular reactors (SMRs) and next-generation reactors that promise enhanced safety and efficiency. Increased funding for regulatory agencies may streamline the approval process for new nuclear projects, and faster deployment of nuclear energy. Budget discussions could also include funding for research on nuclear waste management.
We believe Union Budget 2025 presents a pivotal opportunity for investors to reassess their long-term investment strategies. By focusing on sectors poised for growth due to expected government reforms, such as real estate,railways, telecom, renewable energy, EV, and consumer goods, investors can position themselves advantageously for their long-term investment.
(The author is the Vice President- Bonanza)
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