Nifty FMCG Index Surges 4% After Union Budget 2025 Tax Relief

The Nifty FMCG index saw a significant jump of 4% following Finance Minister Nirmala Sitharaman's announcement in the Budget 2025. The Finance Minister revealed that no income tax will be levied on income up to Rs 12 lakh, a move aimed at boosting disposable income for middle-class households. The tax relief, along with other measures, is expected to stimulate consumer demand, particularly for essential goods, benefitting FMCG companies.

In her Union Budget 2025 speech, Sitharaman highlighted the introduction of a new, simplified income tax regime that will benefit the middle class. This reform includes a major change: individuals earning up to Rs 12 lakh will no longer have to pay any income tax. The reduction in tax liabilities is expected to give a significant boost to household incomes, which in turn should drive up the demand for consumer goods, particularly staples and essential products.

The announcement had an impact on shares of major FMCG companies. Stocks of Hindustan Unilever, ITC, Marico, Dabur, and Godrej Consumer Products saw gains ranging from approximately 2% to 6.5%. Other sectors related to consumption, such as food delivery companies like Zomato and Swiggy, also witnessed a rise of around 6% in trade. By 2:05 PM, the Nifty FMCG index had risen approximately 4%, outpacing the flat performance of the broader Nifty 50 index.

The announcement was timely, as FMCG firms have been grappling with sluggish consumer demand, particularly from middle- and lower-middle-class segments. The first half of FY25 was tough for the sector, as high inflation and weakened consumer spending resulted in slowed growth. Volume growth, especially in urban areas, had been stagnant, with many consumer companies struggling to achieve double-digit growth. However, expectations for tax relief had already been building ahead of the budget, and this move has offered a ray of hope to the industry.

Apart from FMCG stocks, the Nifty consumer durable index also jumped by 2.96% around 2:07 PM, signaling optimism across the broader consumption sector. Meanwhile, the automobile sector also saw a positive movement, with shares of Maruti Suzuki, M&M, Bajaj Auto, TVS Motors, Eicher Motors, and Hero MotoCorp rising between 2% and 5%. It is expected that the tax changes will also boost demand for vehicles.

The new tax regime is expected to stimulate consumption, as households will have more disposable income, leading to increased demand for goods and services across various sectors.

In Conclusion

The Finance Minister’s move to increase the income tax exemption limit to Rs 12 lakh in Budget 2025 has been well-received by the market, especially in the FMCG sector. With lower tax burdens, consumer spending is expected to rise, benefiting companies across industries. The relief for middle-income taxpayers is expected to boost disposable income, driving consumption growth and reviving market sentiment, particularly in the wake of slower demand in recent quarters. As a result, the market is showing optimism, with key stocks witnessing a surge in trade.