Union Budget 2025: How Nifty 50 Moved One Month Before and After Budget in Last 5 Years

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget on February 1, 2025. It comes at a time when the Indian stock market is going through a rough patch amid signs of economic slowdown, foreign capital outflow, and uncertainty around the US Federal Reserve’s interest rate decisions and Donald Trump’s trade policies.

With global uncertainties and various challenges, all attention is focused on the Union Budget 2025. Experts anticipate it will maintain a balance of increased capital expenditure to drive growth with the need for fiscal consolidation.

Nifty 50: Pre- and Post-Budget Performance in Last 5 Years

In January 2025 so far, the benchmark NSE Nifty 50 index has tanked over 2.7%; keeping in trend with the one-month performance of the stock market before the budget in the last five years. Benchmark Nifty 50 fell four times in a month ahead of the Union Budget, out of the last five years. Except in 2024, when the index jumped over 4% in a month in the run-up to the event, the index fell up to 2.5% in the other four years. The trend indicates a cautious market ahead of the fiscal announcements, where investors are wary about the potential policy impacts.

On the other hand, the market's response to the budget announcement itself has been a mixed bag in recent years. In 2024, the index gained nearly 1.3% in the month following the budget announcement. However, in 2023, it witnessed a decline of about 2%. In 2022, the index fell by more than 3%, while in 2021, it gained over 6.5%. In 2020, Nifty dropped over 6.35% post-budget.

What Dalal Street Expects from the Budget 2025

As the government prepares its budget for FY25, market experts are expecting a mix of fiscal prudence and growth-oriented measures.

Ankita Pathak, Chief Macro and Global Strategist at Ionic Asset by Angel One Ltd believes that despite the growth slowdown the fiscal deficit will likely be reduced to 4.7% for FY25, a slight improvement over the budgeted 4.9%, given the lower capital expenditure in the year and additional revenue from RBI dividends.

 “FY26 budget will be made at the crossroads of lower growth and sticky inflation. In my opinion, fiscal consolidation is inevitable and the government of India is likely to roll back the fiscal deficit to 4.5% of GDP, which goes well with policy continuity. It will also add credibility to the fiscal stance. However, the question is what will then support growth,” said Pathak.

India’s growth expectations have been lowered to below 6% from above 7%. While the growth outlook has been tapered, she anticipates that fiscal consolidation will leave room for supportive monetary policies aimed at stimulating economic revival.

In line with this, Karthick Jonagadla, smallcase manager and CEO of Quantace Research, emphasizes the delicate balancing act the government faces: maintaining fiscal discipline while implementing growth-oriented initiatives.

Key expectations for the 2024 budget include measures to boost consumer spending and boost the manufacturing sector, particularly through the expansion of the Production-Linked Incentive (PLI) schemes. The government's push to increase private capital expenditure and public infrastructure investment, as well as support for MSMEs, is also likely to be in focus.

With a projected fiscal deficit of 5.9% for FY24, Jonagadla expects the government to reaffirm its commitment to reducing the deficit to below 4.5% by FY26. “This fiscal prudence will be crucial to sustaining investor confidence and ensuring macroeconomic stability, especially in the face of global uncertainties such as inflationary pressures and volatile crude oil prices,” he said.

In addition, measures such as increasing the basic income tax exemption limit and reducing tax rates for middle-income groups are expected to enhance disposable incomes and stimulate demand, revitalizing consumption across sectors.

Jonagadla also expects the PLI program to be expanded to include high-growth sectors such as semiconductors, advanced textiles and green energy.

The stock market's performance around the Union Budget is not only influenced by domestic policy but also by global economic conditions. Volatile crude oil prices, inflation concerns, and shifting global trade dynamics are all key factors that investors will consider when interpreting the budget’s implications.

Pranav Haridasan, MD and CEO of Axis Securities says the government is expected to prioritize infrastructure expansion, aiming to reduce logistics costs by 4-6% of GDP in the coming years. However, significant increases in capital expenditure may be unlikely, given the emphasis on maintaining fiscal balance alongside economic growth, he added.

Continued expansion of the Production-Linked Incentive (PLI) scheme will remain a key focus. “The government may introduce new incentives to encourage R&D, positioning India as a global innovation hub. The falling rupee has made imports expensive but created opportunities to boost exports. Although uncertainties such as protectionist policies are likely to make headlines, India has a chance to position itself as a key global player. We expect the upcoming budget to address these dynamics and pave the way for more innovation,” Haridasan said.

As the market anticipates the Union Budget 2025, the performance of the Nifty 50 over the last five years suggests that investors are cautious ahead of the budget. Experts are expecting a balanced approach that focuses on fiscal consolidation, targeted growth initiatives and policies that boost investor confidence. How the market reacts in the coming weeks will depend largely on how the government addresses key areas such as inflation, fiscal deficit, tax policies and economic revival.