Analysts do not expect the stock markets to rally much from here on till the Budget 2025 presentation on February 01. Investors, they suggest, will be more glued to the policy implementation plan of President Trump in the US in the initial few days, and how corporate earnings for the third quarter of fiscal 2024-25 (Q3-FY25) play out back home. The markets, Rupen Rajguru, head of equity investment and strategy at Julius Baer India believes, are going into this event with minimal expectations amid a tepid Q3-FY25 earnings season thus far. In this backdrop, he does not see a pre-budget rally. “The markets can only rally (marginally) because of external factors, such as the dollar index (DXY) coming off and some of the measures that Donald Trump might announce in the initial few days after taking over as the 47th President of the United States. He may not be as harsh as earlier perceived. That said, a post budget rally cannot be ruled out as the expectations are low going into this event. A relief on the taxation front, for instance, can trigger a market rally,” Rajguru said.
From a policy perspective, analysts expect some tax rationalisation (though not large cuts), an export push, better centre-state capex coordination, an extension of employment-linked benefits, and more clarity of structural reforms being pursued, in Budget 2025. Weak equity markets in recent months, they said, may lower capital gains tax revenue growth for the government, pushing tax buoyancy down after a few heady years. ALSO READ: Donald Trump 2.0 presidency: What it means for stocks, H1-B visa, bitcoin For the market, the key things to watch are the extent of fiscal consolidation, the delta in spending on physical and social infrastructure and sector level incentives/spends, according to Morgan Stanley. As of now, the markets, they said, seem to be approaching the budget with skepticism and could be dealing with both volatility and upside risk post budget. “We expect robust capital spending to remain a key theme in the Budget. In order to drive the next leg of capex-led growth, the government is also likely to undertake measures to crowd in private investments, which have so far lacked pace and breadth across sectors,” wrote Ridham Desai, head of India research and India equity strategist at Morgan Stanley in a recent co-authored report. Chart check Technically, too, the NSE Nifty 50 index, charts suggest, remains on a weak footing on the basis of price-to-moving averages action on the daily scale. The index is quoting well below its key moving averages, with the majority of the shorter-term averages below the long-term average. The near-term bias for Nifty is expected to remain negative as long as it remains below its 20-day moving average (DMA) that stands at 23,590. Above this level, the 200-DMA at 23,965 could act as a stiff roadblock. ALSO READ: Will Sensex see a relief rally or extend fall this week? 76,300 remains key Similarly on the weekly scale, the Nifty is quoting below the 20-and 50-weekly moving average (WMA) at 23,687 and 24,435 levels, respectively. Even in the bull case scenario, of a strong pre-Budget rally, the upside for the Nifty seems capped around 25,300 for now, technical charts suggest. On the downside, Nifty can test 22,250 mark, down around 4 per cent from the current levels in case the near-term support levels break. Support for the Nifty exists at 23,000, 22,880 and 22,650 levels. Among key momentum oscillators, the Average Directional Index (ADX) – a key tool used in determining the strength of the prevailing trend – is strongly in favour of the bears. Thus, the probability of further downside in the near-term remains high. “I do not see much upside in the markets from here on till the budget. A pre-budget rally looks difficult this time around as global cues (Trump's policies) and corporate earnings season back home take center-stage,” said G Chokkalingam, founder and head of research at Equinomics Research.