Consumption stocks rally on Budget proposals; Maruti Suzuki, Trent surge 7%

The Union Government has raised the income tax exemption limit to Rs 12 lakh per annum under the New Tax Regime, Finance Minister Nirmala Sitharaman said while presenting the Budget 2025

Shares of fast moving consumer goods (FMCG) and automobiles companies have rallied by up to 7 per cent on the National Stock Exchange (NSE) in Saturday’s intra-day trade after the Union Government raised the income tax exemption limit to Rs 12 lakh per annum under the New Tax Regime, Finance Minister Nirmala Sitharaman said. The centre will now allow taxpayers to claim the annual value of two self-occupied properties as nil, the finance minister said.

 

The new income tax slabs and rebates have pushed up the annual incomes free from taxation from Rs 7 lakh to Rs 12 lakh. This is a big relief to the middle and lower middle class in terms of higher savings, which should drive consumption, according to analysts. 

"As visualized by us and strongly stressed on multiple channels and in various mediums, the middle class has been given a welcome relief with no Income Tax up to Rs 12 lakh Income. For salaried persons, it will go up to Rs. 12.75 lakh by factoring in standard deduction. In view of the ravages of the inflationary spiral and the shrinking disposable income, this enhanced income tax limit will be welcome across the development spectrum," Dr. Manoranjan Sharma, Chief Economist at Infomerics Ratings said.

 

 

Meanwhile, Shripal Shah, MD & CEO of Kotak Securities, said the move is expected to ease the financial burden on the middle class and cushion the impact of rising prices. 

  "A major relief in personal income tax has been introduced, allowing individuals earning up to Rs 12 lakh to pay zero income tax. This move is expected to ease the financial burden on the middle class, cushion the impact of rising prices, and drive higher consumer spending as well as investments. Additionally, several reforms in the TDS and TCS regime have been well received," he said 

 

Following the announcement, at 12:24 PM, Nifty FMCG and Nifty Auto, the top two gainers among sectoral indices, were up 3 per cent, as compared to the 0.04 per cent rise in the Nifty 50. Nifty Realty and Nifty Consumer Durables indices are up nearly 2 per cent.

  Godrej Consumer Products, ITC, Britannia Industries, Hindustan Unilever (HUL) and Colgate Palmolive, constituents of the FMCG index, are up in the range of 3 to 6 per cent. 

 

Maruti Suzuki India (MSIL) and TVS Motor Company from the Auto index rallied up to 7 per cent, while Bajaj Auto, Eicher Motors, Hero MotoCorp and Mahindra & Mahindra were up in the range of 2 to 3 per cent. Blue Star Company, Crompton Greaves Consumer Electricals, Havells India and Voltas, from the Consumer Durables index gained between 3 and 5 per cent.  Trent, Avenue Supermarts (DMart), Bikaji Foods International, Varun Beverages, Zomato and Mrs. Bectors Food Specialities were up in the range of 5 to 7 per cent.

 

Among the individual stocks, MSIL surged 7 per cent to Rs 13,150 in intra-day trade amid heavy volumes. MSIL is likely to be the beneficiary of buoyant demand in the passenger vehicles (PV) segment, driven by rising demand in tier-2 and tier-3 cities and rural areas. Sales from rural areas will continue to improve, driven by strong farm sentiments because of higher rainfall and Kharif sowing. Mirae Asset Sharekhan expects the share of first-time buyers to increase going forward, aided by a preference for personal transportation.

 

Monsoon season was above normal and well spread out, which will help agri production to be better in the current year for the FMCG sector. This will not only boost rural consumption but will also help agri inflation to stabilise in the near-term. Revenue growth in the near term would be driven by a mix of volume and price-led growth as most companies have taken price increases to mitigate the impact of higher input costs, the brokerage firm said.