Indian stock market continues to assess 2 big policy moves to boost economy

Mumbai: The stock market saw two major policy moves this week that could significantly impact India’s economic trajectory — the Union Budget 2025, which introduced tax cuts to boost consumption and investment, and the RBI’s 25 bps rate cut, signalling a shift towards monetary easing, experts said on Saturday.

These measures collectively aim to strengthen economic growth while maintaining fiscal discipline. On the markets front, Nifty 50 is up 1 per cent, Nifty Midcap is up 0.9 per cent and Smallcap index is up 0.7 per cent.

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

However, the central bank maintained its policy stance, keeping a neutral approach. The Monetary Policy Committee (MPC) decided to reduce the repo rate from 6.5 per cent to 6.25 per cent.

The Sensex eventually settled at 77,860, down by 198 points. The Nifty index fluctuated between 23,694 and 23,443, before closing at 23,560 with a decline of 43 points.

According to Krishna Appala of Capitalmind Research, the Budget provided long-awaited tax relief, putting more money in the hands of consumers.

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

“With an estimated Rs 1 lakh crore expected to flow back into the economy through these tax cuts, the move is likely to encourage higher discretionary spending and savings,” said Appala.

Despite these tax reductions, the government has kept its fiscal consolidation efforts intact, setting the FY26 fiscal deficit target at 5.3 per cent of GDP, down from 5.8 per cent in FY25.

Alongside the fiscal push, the RBI’s decision to cut the repo rate by 25 bps to 6.25 per cent marks the beginning of a potential rate-cut cycle after over two years of unchanged policy rates.

This follows a 50 bps CRR cut in December 2024 and a Rs 60,000 crore bond purchase programme, all aimed at improving liquidity in the banking system.

Hrishikesh Yedve of Asit C Mehta Investment Interrmediates Ltd (a Pantomath Group company) said that on the weekly scale, index has formed a green candle, confirming the bullish engulfing pattern formed last week.

“On the downside, immediate support for the Bank Nifty is near 49,650, while on the upside, 50,600 will function as resistance. Traders should closely monitor these levels for potential opportunities. However, looking at weekly formation, buy on dips strategy should be adopted in Bank Nifty,” he mentioned.

—IANS