January 31, 2025 – The Indian stock markets continued their upward trajectory for the fourth consecutive session, bolstered by optimism surrounding the Union Budget 2025. Both Sensex and Nifty saw impressive gains of over 1% on January 31, 2025, as market participants positioned themselves ahead of the highly anticipated budgetary announcements. Despite challenges such as slowing economic growth and foreign institutional investor (FII) outflows, the market remains buoyed by pre-budget optimism.

Key Market Performance Highlights

Sensex surged by 740 points (1%) to close at 77,500.
Nifty gained 259 points (1.1%), closing at 23,508.

All 13 sectoral indices ended in the green, with FMCG, financials, and automobile stocks leading the way, rising by 0.5% to 2%. The broader market outperformed the benchmark indices, with mid-cap and small-cap stocks advancing nearly 2% each.

Sentimental Boost from Economic Survey 2025

While the Economic Survey 2025 provided a sentimental boost, projecting India’s GDP growth at 6.3-6.8% for FY26, it was not the sole driver of today’s rally. Analysts pointed out that the market’s positive sentiment is largely driven by the pre-Budget optimism, as investors await potential relief measures, infrastructure spending announcements, and business-friendly reforms.

According to Osho Krishnan, Technical and Derivative Analyst at Angel One, the recent market rally is supported by short covering and optimism surrounding the Budget. However, he emphasized that no strong bullish bets have been placed, and cautioned that the broader market may see mixed trading as the Union Budget 2025 approaches.

Foreign Institutional Investor (FII) Outflows Continue

Despite the market’s recent gains, foreign institutional investors have continued to pull funds from Indian equities. January 2025 saw an outflow of Rs 86,100 crore, marking the second-highest monthly outflow on record. Slowing economic growth, weaker corporate earnings, and elevated U.S. Treasury yields have driven these outflows, adding pressure to the Indian markets.

Stock and Sector Performance:

Top Performers:
- Tata Consumer: Shares surged 6% following strong growth in tea, salt, and international markets.
- Bharat Electronics: Gained 2% after reporting strong third-quarter earnings.
- Nestle India: Rose over 4% after reporting a 6% year-on-year profit growth in Q3 FY25.
- Larsen & Toubro: Up 4%, hitting a new high for order books driven by strong international business.
Lagging Stocks:
- Jindal Steel & Power: Declined by 6% after disappointing Q3 results and a significant drop in profit.
- Bank of Baroda: Fell over 4% amid declining net interest margins and profit pressures.

Technical Outlook: Resistance and Support Levels for Nifty

Jatin Gedia, Technical Research Analyst at Sharekhan, pointed out that Nifty faces immediate resistance at 23,574-23,600 and is expected to find strong support at the 23,300 level, aligned with its 20-day moving average. For Budget Day, Gedia forecasts a trading range of 23,300-23,700 for Nifty, with the next key resistance level seen at 23,700.

Focus on Budget 2025: Key Market Expectations

The upcoming Union Budget 2025, scheduled for February 1, is expected to be a game-changer for the market, with investors hoping for:

Tax Relief for the Middle Class: Anticipation of a reduction in tax rates and higher deductions, particularly under the new tax regime.
Infrastructure Investment (CAPEX): Market participants are focused on whether the government will commit to front-loading CAPEX for the first half of FY 2025-26. Any positive news on CAPEX spending would be a significant positive trigger for the market.
Pro-Business Reforms: Investors are closely watching for new announcements on business-friendly policies that can accelerate growth and reforms, especially after the slowdown in the pre-election period.

Broader Market Outlook: Cautious Optimism Amidst Volatility

Despite the recent rally, market volatility is expected to persist as the Union Budget 2025 is announced. Swapnil Shah, Chief Investment Officer (CIO) at Fort Capital, noted that the focus will be on the government’s commitment to reviving CAPEX and accelerating reforms. Mid-cap and small-cap stocks are likely to remain under pressure due to muted Q3 FY25 earnings and a cautious outlook for the next earnings season.

Global Market Developments

While Indian markets have shown resilience, European stocks have surged to record highs, driven by strong performances in the technology and healthcare sectors. Meanwhile, global trade tensions remain in focus, with President Donald Trump set to impose 25% tariffs on imports from Mexico and Canada starting February 1, 2025.

With the Union Budget 2025 just around the corner, the Sensex and Nifty are experiencing a wave of optimism, with investors eagerly awaiting key announcements that could shape India’s economic outlook for the coming fiscal year. Tax relief, infrastructure spending, and pro-business measures are likely to be central to the Budget, which could provide a fresh momentum for the stock market. However, investors should remain cautious about market volatility, especially in mid- and small-cap stocks, and monitor the Budget announcements for further direction.

Stay updated with the latest market trends, stock recommendations, and expert insights as Budget 2025 approaches.