Stock market today: Nifty 50, Sensex end flat as income tax cut fails to cheer D-Street; PSU, defence stocks drag | Stock Market News

Stock Market Today: Indian markets ended the special trading session on Budget Day, February 1, on a flat note as investors reacted negatively to the Union Budget 2025 capex numbers, which announced a 9% YoY increase for FY26, falling short of market expectations. Economists had anticipated that the government would announce a higher capex allocation amid the slowing Indian economy.

The Nifty 50 ended the session with a marginal drop of 0.11% at 23,482, while the Sensex closed flat at 77, 505. The Nifty Smallcap 100 index rose 0.12% to 16,560, while the Nifty Midcap 100 index concluded the day with a drop of 0.42%, closing at 53,486. However, the Nifty Smallcap 100 index has managed to end the session in the green, rallying 0.41% to settle at 16,979.

The Union Budget 2025 took the markets by surprise with announcements on both capex and income tax. As expected, the government targeted falling consumption, particularly in Urban India. To boost this, Union Finance Minister Nirmala Sitharaman announced that no income tax would be levied on incomes up to Rs12 lakh. 

Prior to the Budget, there was widespread anticipation that the FM would offer relief to middle-class consumers by raising the tax exemption limit to ₹10 lakh and adjusting tax rates across various slabs.

In recent quarters, demand from Urban India has been shrinking due to rising food inflation and a drop in wages, which is reflected in the performance of FMCG, auto, and consumer durable companies. However, today’s income tax cut provided a strong boost to these sectors.

The Nifty FMCG index ended the session with a gain of 3%, followed by Nifty Consumer Durables and Nifty Auto, rallying 3% and 1.2% respectively. 

Mahavir Lunawat, Group Founder & Managing Director, Pantomath Financial Services Group, said, “Budget 2025 also introduced the much-awaited tax relief for the Indian middle class by completely exempting individuals earning up to ₹12 lakh from taxation under the new tax regime. The restructuring of tax slabs has resulted in a simpler and more progressive framework, ensuring that people have greater disposable income that will eventually lead to strong investment for better future.”

“By streamlining the tax system and making it more accessible, these changes are expected to boost savings and increase participation in primary and secondary markets, leading to better capital formation overall,” Mahavir added.

Railway, defence stocks hit hard

While consumption-related stocks thrived in today’s session, the weaker capex target impacted the capex-linked stocks, which took a severe beating in trade following the government’s decision in the Union Budget 2025-26 to reduce the revised capital expenditure (capex) estimate for FY25 to ₹10.18 lakh crore.

This reduction is attributed to slower capital spending during the first half of the fiscal year. For FY26, Nirmala Sitharaman raised the capex target to ₹11.21 lakh crore, which was lower than expected. Industry insiders had anticipated the government would increase the capex allocation to ₹11.5 lakh crore, up from ₹11.11 lakh crore a year ago.

According to the Budget document, the allocation for the railways sector has remained unchanged at ₹2.55 lakh crore for FY26, the same as the previous financial year. Global brokerage firm PhillipCapital had expected the budget allocation for railways to be between ₹2.8 lakh crore and ₹2.9 lakh crore for FY26.

For the defence sector, the government has allocated ₹6,81,210 crore in the budget for 2025-26, up from last year’s outlay of ₹6,21,940 crore. The total capital outlay has been pegged at ₹1,92,387 crore.

Following the lower-than-expected figures, railway, defence, and capital goods stocks corrected sharply. Railway stocks such as Ircon International, Rail Vikas Nigam, IRFC, and Indian Railway Catering all ended the session with a drop of up to 6%.

Likewise, defence-related stocks, including Bharat Dynamics, Mazagon Dock Shipbuilders, Bharat Electronics, Cochin Shipyard, and Hindustan Aeronautics, saw declines of up to 5%.

PSU bank stocks also tumbled in trade, as expectations grew that the low capex would impact their corporate lending business. Additionally, they were further impacted as the Union Budget 2025 raised gross market borrowings by 5.7% to ₹14.8 lakh crore for FY26 to finance a fiscal deficit of 4.4%, up from the ₹14.1 lakh crore target set for FY25.

Technical Outlook

Rupak De, Senior Technical Analyst at LKP Securities, said, “The Nifty has witnessed a roller-coaster ride during the budget session. On the daily chart, a small-bodied candle has formed, indicating indecision. Nifty has support at 23,280, and as long as it remains above this level, the trend might stay positive. On the higher end, the index could move towards 23,700–24,000 in the short term. However, a fall below 23,280 might trigger panic in the market.”

Shrikant Chouhan, Head of Equity Research, Kotak Securities, said, “We are of the view that the short-term market texture is bullish, but due to temporary overbought conditions, we could see range-bound action in the near future. For traders, the 20-day SMA or 23,270/77000 and 23,100/76500 would act as key support zones, while the 50-day SMA or 23,810/78500 and 23,900/78800 could be the key resistance areas for the bulls. For Bank Nifty, as long as it is trading above its 20-day SMA or 49,000, the bullish formation is likely to continue. On the higher side, 50,250 and 50,500 would be the key resistance zones for the traders.”

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.