Indian stock market weighs two major policy boosts

The stock market saw two big policy announcements this week that can impact India’s growth trajectory — the Budget 2025 that announces tax cuts to boost consumption and investment and the RBI’s 25 bps rate cut signalling a shift towards easing, said experts on Saturday. Both are meant to stimulate growth while maintaining fiscal discipline. On the markets front, Nifty 50 is up 1%, Nifty Midcap is up 0.9% and Smallcap index is up 0.7%.

The Indian stock market closed lower on Friday as investors waited to assess the RBI’s Monetary Policy Committee (MPC) decision to cut the repo rate by 25 bps.

But the central bank kept its policy stance neutral. The MPC decided to reduce the repo rate from 6.5% to 6.25%.

The Sensex finally closed at 77,860, down by 198 points. The Nifty index oscillated between 23,694 and 23,443 before closing at 23,560, down by 43 points.

The Budget has provided long-awaited tax relief, money in consumers' pockets, according to Krishna Appala of Capitalmind Research.

Individuals earning over Rs 24 lakh will now save an additional Rs 1.1 lakh per year, while those earning up to Rs 12 lakh will effectively pay no income tax.

"With an estimated Rs 1 lakh crore to flow into the economy through these tax cuts, it will lead to higher discretionary spending and savings," said Appala.

Despite these cuts in taxes, the fiscal consolidation preserved by the government is such that FY26 fiscal deficit is contemplated to be at 5.3% of GDP against 5.8% of FY25.

Backed by the fiscal push, it is RBI which has given a start to the rate-cut cycle after more than two years of the no-change rate period as it cut 25 bps 6.25%.

This follows a 50 bps CRR cut in December 2024 and a Rs 60,000 crore bond purchase programme, all to improve liquidity in the banking system. Hrishikesh Yedve of Asit C Mehta Investment Interrmediates Ltd (a Pantomath Group company) said on weekly scale index has formed a green candle and confirmed the bullish engulfing pattern formed last week.

On the downside, 49,650 will be the immediate support for Bank Nifty and 50,600 will be the resistance. Traders should watch out for these levels. But on weekly formation, buy on dips can be the strategy for Bank Nifty," he said.