How to invest in equities after the Budget 2025: Best sectors to invest

Finance Minister Nirmala Sitharaman presented the Union Budget 2025 on 1 February 2025. The budget sought to boost consumption by offering tax giveaways for the middle class to stimulate economic growth. From a stock market point of view, analysts believe the budget is positive for investors, with select sectors expected to make gains. 

This blog post will decode the key budget announcements to help you make informed investment decisions. We will also explain the budget’s impact on specific sectors to guide investors in choosing the best sector to invest in. Let’s dig in.

Budget 2025 highlights 

The budget outlines several reforms and allocations that could directly impact different sectors. You can refer to the budget document for detailed information about budget allocations. Here are some of the budget highlights:  

• Tax Reforms:

The tax reforms applicable to individuals who have opted for the new income tax regime will provide tax exemptions of up to ₹80,000 to those who earn up to ₹12 lakh a year. Additionally, the tax slabs and rates were also overhauled. The changes to the new tax regime provide tax relief primarily to the salaried Indian middle class, increasing their disposable income and, in turn, their purchasing power and savings capacity. 

• Increased Expenditure:

The budget pegged the total expenditure for the next fiscal year at ₹50.65 lakh crore, a 7.4% increase from the previous year. Government capex is estimated to increase by 10% in the next fiscal to Rs. 11.21 lakh crore, indicating a strong focus on infrastructure and development projects. However, it should be noted that the budgetary capex estimate of Rs. 11.11 lakh crore proposed in last year’s budget (FY25) was lowered to Rs. 10.18 lakh crore as specific ministries could not meet the spending target. 

• Fiscal Deficit Management:

The finance minister pegged the fiscal deficit target at 4.4% of GDP in line with the policy of fiscal prudence. The step reassures investors about the government’s intent to manage borrowings and the effective management of public finances. 

• Support for MSMEs and Startups:

Reforms aimed at supporting micro, small, and medium enterprises (MSMEs) and the Indian startup ecosystem were also mentioned in the budget speech. The boost to budding enterprises is vital for job creation and economic growth. 

Clearly, the budget is a boon for individual taxpayers, as it reduces taxes and puts more money in the hands of people. From an equity investor perspective, increased disposable income is expected to boost discretionary spending and corporate earnings in the next financial year. Here are the best sectors to invest in to benefit from the post-budget share market. 

Best sectors to invest in after the Budget 2025 proposals 

Here are some sectors that are likely to have a positive impact owing to the tax changes and other economic and structural measures announced in the Union Budget: 

1. FMCG Sector 

The expected boost in consumption, thanks to the increase in disposable income, is likely to benefit the fast-moving consumer goods (FMCG) sector. The FMCG sector was reeling under the impact of sluggish demand growth in urban areas due to inflationary pressure. The increase in disposable income will likely boost demand, translating into improved sales and profit for some of the leading FMCG companies. 

The FMCG sector comprises the following sub-sectors: 

• Food and beverages—Food and beverage sales are likely to increase. Alcoholic beverage sales might also rise, as people will have more money to spend on non-essential items.
• Personal care and wellness products—As the demand for personal care products increases, the personal care segment may emerge as one of the biggest beneficiaries of increased disposable income. 
• Home care commodities – The luxury home care segment could see an uptick in the coming fiscal year.  

According to analysts, FMCG is one of the best sectors to invest in, considering the tax savings proposed in the budget Take a glance at some of the top listed FMCG stocks in India. 

2. Consumer Durables 

The effect of income tax relief will be felt across the board as tax slabs and tax rates for the new tax regime undergo a revision. All taxpayers are set to gain considerably, and the consumer durables sector could directly benefit from increased disposable income. The consumer durables sector includes the following subsectors:

• Electronics – Mobile phones and laptops may see an uptick in sales. 
• Home appliances – TVs, fridges, and air conditioners may also record an increase in sales.
• Automobiles – Passenger vehicles, especially two-wheelers, could benefit from increased disposable income.

3. Tourism, Hospitality, and Entertainment Sector

The rise in take-home salary for the middle class might be significant enough to fund a domestic holiday. It is fair to presume that travel and tourism-related companies would grab a share of the freed-up income in the coming financial year. The tourism sector will also benefit from other budgetary announcements, such as extending the UDAN air connectivity scheme for tier 2 and tier 3 cities. 

Here are some of the sectors that can benefit from the perspective tourism boost:

• Travel Technology – Ticket booking portals for various modes of travel will likely benefit in the coming financial year.
• Airlines, railway, and other modes of transport – Ticket sales would increase as people travel more. Here are some of India’s top-listed transport stocks. 
• Hotels and other hospitality providers – People book hotel stays when they travel, and thus hospitality industry could see sales growth in the coming year. 
• Luggage industry – The luggage industry could also see an increase in sales as people travel more.

The tourism industry, widely seen as a growing industry in India post-COVID, might get a further boost in the coming financial year. This makes travel and tourism one of the best sectors to invest in India.

4. E-commerce, Food Delivery, and Quick Commerce 

More money might translate to a rise in spending on digital platforms that cater to shopping, goods delivery, and quick commerce space in urban settings. Some of the likely beneficiaries of digital growth would be: 

• Food delivery apps – Revenue from platform fees and other parameters would increase in the coming year as people spend more on ordering food online. 
• E-commerce – E-com sales might see an uptick as increased disposable income might lead to a rise in online shopping, especially during festive seasons. 
• Quick commerce – Increased disposable income might boost discretionary spending, leading to a rise in quick commerce sales in bigger cities. 

Some new age-listed tech stocks catering to these segments could give an edge to your portfolio. 

5. Banking and Other Financial Service Providers

The household savings rate in India came in at 18.3% in 2023. It is safe to assume that increased disposable income will lead to a rise in savings for Indian households. The increased savings and investments can benefit the following segments of the BFSI sector in India:

• Banking – Both public and private sector banks might attract increased savings in the coming financial year. The rise in personal savings can help banks improve their bottom line. 
• Financial Service Providers – Fintechs and traditional financial service providers could see a boom in business as people have more money to invest.
• Asset management companies – Mutual fund investments are becoming popular in India. The increased income might encourage people to invest more in mutual funds.
• Financial intermediaries – Intermediaries such as brokers, custodians, and managers might see increased activity and revenue as the financial sector gains traction, thanks to increased disposable income available for investment. 

While the budget gave a boost to the disposable income of the average Indian taxpayer, that is not the only budget proposal that can positively impact the Indian share market in the coming financial year. Here are some of the other sectors that are expected to witness growth. 

6. Infrastructure Sector  

The central government capex will see a 7.4% increase from the previous year. The increase in capex will boost infrastructure spending and benefit companies in sectors such as construction and engineering. 

Additionally, infrastructure is also a core sector with massive mature companies. Adding infra stocks to your investment portfolio will help add stability while offering diversification. Here are some of India’s listed infrastructure stocks. 

Post Budget Share Market Investment Strategies 

The Indian stock market has been volatile for the last few months, leaning towards a bear phase. Given the current market phase, it is important to devise investment strategies and monitor investments regularly. Here are some of the investment strategies that you can consider: 

• Diversification into Growth Sectors 

The budget will impact multiple sectors in the coming financial year, providing ample diversification opportunities. It is recommended that investors optimally diversify their investments to hedge risk. 

• Focus on Quality Stocks

All sectors have their share of quality stocks and speculative stocks. Where growth is led by government capex, fundamentally strong quality stocks tend to outperform speculative stocks. Investors can look for stocks with strong financials and solid fundamentals that are well-placed to benefit from the consumption boost. 

• Monitor Corporate Earnings Announcements 

The expected consumption boost from tax savings will be most visible in the quarterly earnings reports of consumer sector firms. Monitor them to ensure that increased disposable income is driving sales. This will also help you identify allocation mistakes early on. 

• Consider Mutual Funds or ETFs

Direct equity investments are not for everyone. They require market knowledge, time, and monitoring. If you are a passive investor, you can look for sector-specific mutual funds or themes likely to benefit from the budget proposals. This will simplify the investment process for you. 

Note: Equity investment and stock picking involve a high degree of risk. Investors are advised to conduct thorough research before investing in any stock from any sector. 

Conclusion

The Union Budget 2025 has outlined plans to reinvigorate economic growth, boosting consumption and infrastructure development while maintaining fiscal discipline. Investors should assess their portfolios mindful of these changes, considering sector-specific impacts while following a diversified approach. By aligning investment strategies with the government’s priorities outlined in the budget, investors can position themselves better to capitalize on emerging opportunities in the Indian economy.