Jan 27-Feb 1 stock market watch | Budget, corporate results will set tone

On February 1, the government will unveil the 2025-26 Union Budget, which is expected to address pressing issues like growing inflation, a depreciating rupee, and the possibility of higher tariffs being imposed by the US Government. Finance Minister Nirmala Sitharaman is expected to unveil a series of measures to stimulate the economy. Analysts expect a budgetary deficit of 4.7-4.8 per cent of GDP for FY25, below the budget estimate of 4.9 per cent.

According to financial services firm, Nomura, the government may change the income tax slab to encourage consumer spending in the upcoming 2025-26 general budget.

Nomura expects India to exceed its fiscal deficit target for FY25. The deficit is expected to be 4.8 per cent of GDP, slightly lower than the earlier forecast of 4.9 per cent. Emkay Global said in a note that it expects a relatively quiet budget, focusing on continuity rather than dramatic change.

A countercyclical stimulus is unlikely, as it would entail straying from the pre-announced consolidation path. The heavy lifting would have to be done by relaxed lending guidelines and monetary easing further down the line. Tax revisions, especially adjustments in slabs, could be announced to encourage consumption, while customs duty changes are likely to address tariff-related challenges under Trump’s second term, Emkay Global said.

Also read | Will Budget 2025-26 ease middle-class burden? | Talking Sense with Srini

Corporate results

The corporate earnings season is set to gather momentum, with over 500 companies slated to announce results next week like key players from the Nifty 50, including Hyundai Motor India, PB Fintech, Indian Oil Corporation, GAIL India, Canara Bank, Bandhan Bank, Shree Cement, Bosch, Dabur India, and LIC Housing Finance.

Coal India, ONGC, Tata Steel, Bajaj Auto, Cipla, Bajaj Finance, Bajaj Finserv, Maruti Suzuki, Tata Motors, Larsen & Toubro, IndusInd Bank, Nestlé India, Sun Pharma, Adani Enterprises, and Adani Ports, will release their third-quarter results.

Domestic economic data

Fiscal deficit figures and infrastructure output for December are expected to be announced on January 31. Data on bank loan and deposit growth for the fortnight ending January 17 and foreign exchange reserves for the week ending January 24, will also be published the same day.

India’s forex reserves have fallen to $623.98 billion as of January 17 from $625.87 billion the previous week.

Also read: Union Budget may extend concessional tax rates for manufacturing and GCCs

Global trends

The financial markets are paying close attention to the US Federal Reserve’s first meeting of 2025, scheduled for January 28-29. This meeting will set the tone for monetary policy in the new year, and investors are eager to see how the Fed plans to navigate economic challenges.

One of the key points of interest is the Fed funds rate (the rate banks charge each other for short-term borrowing of funds held at the Federal Reserve), which is expected to remain in the range of 4.25–4.5 per cent. This means the Federal Reserve is unlikely to change interest rates at this meeting.

Another critical focus is the release of advance estimates for US GDP growth for the fourth quarter of 2024. In the third quarter, the US economy grew by 3.1 per cent, and analysts are keen to see whether this momentum continued in the year's final months.

Trump has added a twist to the conversation by urging an immediate reduction in interest rates. During his speech at the World Economic Forum in Davos, he called for drastic rate cuts, which have caught the attention of both markets and policymakers. However, Fed Chair Jerome Powell had previously signalled that the central bank would likely implement only two rate cuts in 2025, leaving markets uncertain about the Fed's next steps.

Hyundai Motor India, PB Fintech, Indian Oil Corporation, GAIL India, Canara Bank, Bandhan Bank, Shree Cement, Bosch, Dabur India, and LIC Housing Finance.

In addition to the Fed's decision, several other pieces of economic data will provide a clearer picture of the US economy’s health.

Also read: World Economic Forum | Manufacture in US or face tariffs: Trump to global firms

Key reports include data on new home sales, weekly jobless claims, personal income and spending, and real consumer spending. These indicators will help markets understand how consumers are managing and whether the economy is still showing signs of strength.

Overall, the combination of the Fed’s decisions, economic growth data, and consumer indicators will provide crucial insights into the direction of the US economy and its impact on global markets.