Indian Stock Market Reacts to Key Policy Moves Amid Economic Growth Push
The Indian stock market has been closely monitoring two significant policy moves this week, which are expected to have a substantial impact on the country’s economic outlook. The Union Budget 2025, which introduced tax cuts to spur consumption and investment, along with the Reserve Bank of India’s (RBI) decision to reduce the repo rate by 25 basis points (bps), are central to this analysis.
The Indian stock market has been closely monitoring two significant policy moves this week, which are expected to have a substantial impact on the country’s economic outlook. The Union Budget 2025, which introduced tax cuts to spur consumption and investment, along with the Reserve Bank of India’s (RBI) decision to reduce the repo rate by 25 basis points (bps), are central to this analysis.
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Union Budget 2025 and RBI Rate Cut Support Economic Growth
The Union Budget for 2025 has provided a much-needed boost to the economy by introducing tax cuts. These cuts are designed to put more disposable income into the hands of consumers, encouraging higher spending and investments. As a result, the Nifty 50 index is up by 1%, the Nifty Midcap has gained 0.9%, and the Smallcap index rose by 0.7%.
Experts, such as Krishna Appala from Capitalmind Research, have pointed out that the tax relief will benefit individuals, particularly those earning above Rs 24 lakh annually, saving an additional Rs 1.1 lakh per year. Those earning up to Rs 12 lakh will effectively be exempt from paying income tax. With an expected Rs 1 lakh crore flowing back into the economy, this move is expected to stimulate discretionary spending and boost overall economic activity.
RBI’s 25 BPS Rate Cut Signals Shift to Monetary Easing
In addition to the fiscal measures, the RBI’s decision to lower the repo rate by 25 bps to 6.25% has attracted significant attention. This marks the beginning of a possible rate-cut cycle after maintaining rates for over two years. Along with this, the RBI had previously reduced the Cash Reserve Ratio (CRR) by 50 bps in December 2024 and launched a Rs 60,000 crore bond purchase program to enhance liquidity in the banking system.
Despite the RBI’s rate cut, the stock market closed lower on Friday as investors continued to digest the implications of the Monetary Policy Committee’s (MPC) decision. The Sensex settled at 77,860, down by 198 points, while the Nifty index closed at 23,560, with a decline of 43 points.
Market Outlook and Strategy
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Hrishikesh Yedve, from Asit C Mehta Investment Intermediates Ltd, emphasized the bullish trend on the weekly scale, noting the formation of a green candle pattern. He recommended a “buy on dips” strategy for Bank Nifty, with immediate support levels near 49,650 and resistance at 50,600.
Despite the short-term market fluctuations, experts remain optimistic about the long-term impact of these policy moves on India’s economic growth, especially as fiscal discipline is maintained while stimulating consumption and investment.
