Stocks in Consumption-Based Sectors Attract Significant Buying Interest Following Tax Cuts

Finance Minister Nirmala Sitharaman's announcement of substantial income tax cuts for the middle class has sparked significant interest in stocks from consumption-based sectors. This move, aimed at revitalising a slowing economy amidst global uncertainties, led to notable gains in several stocks. Blue Star shares rose by 13.17%, Crompton Greaves by 7.73%, Havells India by 5.74%, and Voltas by 5.11% on the BSE.

The consumer durables index on the BSE saw a rise of 2.47%, reaching 59,283.06. Despite the overall market's lukewarm response to the Budget, stocks in consumer durables, FMCG, and automobile sectors experienced a surge in buying interest due to the announced tax relief for salaried individuals. Prashanth Tapse from Mehta Equities Ltd noted that exempting salaries up to Rs 12 lakh annually from taxes is expected to significantly boost consumption.

Impact on Auto and FMCG Sectors

In the automotive sector, shares of Maruti increased by 4.98%, TVS Motor by 4.08%, Eicher Motors by 3.69%, Bajaj Auto by 3.36%, and Mahindra & Mahindra by 2.96%. The BSE auto index climbed by 1.75% to reach 52,428.15. Siddhartha Khemka from Motilal Oswal Financial Services Ltd highlighted that the Nifty FMCG and consumer durable indices saw sharp gains following the Finance Minister's announcement.

The revised tax structure exempts individuals earning up to Rs 12.75 lakh annually from paying taxes, raising the threshold from Rs 7 lakh. For those earning up to Rs 25 lakh annually, tax savings could reach up to Rs 1.1 lakh due to adjusted slabs. These changes are expected to benefit over 80% of taxpayers, or approximately 6.3 crore people, who earn up to Rs 12 lakh per year.

Market Reactions and Expert Opinions

The reformist budget presented in Lok Sabha aims to reduce taxes for the middle class significantly, enhancing household consumption, savings, and investment opportunities. "The government's intent is clear with their priorities tilted towards consumption going by the big relief on tax rebates changes," said Vijayaraghavan Swaminathan of Avendus Spark Institutional Equities.

FMCG stocks also saw substantial gains: Godfrey Phillips India surged by 9.81%, Radico Khaitan by 9.36%, Emami by 6.37%, Godrej Consumer Products by 6.12%, and United Spirits by 5.32%. The BSE FMCG index rose by 2.91% to reach 21,152.76.

Despite market volatility, the BSE Sensex managed a slight gain of 5.39 points or 0.01%, closing at 77,505.96, while the NSE Nifty fell by 26.25 points or 0.11% to settle at 23,482.15.