With less than a month away, the Union Budget 2025 is expected to continue its focus on ‘Amrit Kaal’ and ‘Viksit Bharat’. The Budget for FY26 will be presented on February 1, and Rahul Ghose, CEO of Hedged.in in an interview with GoodReturns.In said that the market will exhibit heightened volatility in the weeks leading up to the announcement. Ghose believes a pro-budget could trigger a fresh rally, however, than expected fiscal deficit target could sour the sentiment. He expects the Budget to focus on infrastructure development, renewable energy initiatives, and tax reforms.

Furthermore, Ghose revealed that in the past decade, the market has reacted bearishly eight out of ten times on Budget Day. He expects consolidation in Sensex and Nifty during the last quarter of FY25, but the entire 2025 is seen to be sideways. His target for Nifty 50 for the entire 2025, is less than 27,500.

When asked about how Trump’s policies and reforms could impact the stock market, Ghose believes sectors like IT and pharmaceuticals, which are export-oriented, could benefit from any relaxation in U.S. regulations. He also believes Trump’s reforms to strengthen US manufacturing and military capabilities, will also be a key positive for Indian defence companies.

In the case of the rupee, Ghose expects a short correction in the USD dollar against a basket of currencies, but he believes the 2025 year is bullish for this currency, which in return would keep the rupee in a flat-to-under pressure zone.

Here are the excerpts from the interview of Rahul Ghose, CEO of Hedged.in with GoodReturns.In

Q1. How Will the Indian Stock Market React Before And After Budget 2025?

The Indian stock market typically exhibits heightened volatility in the weeks leading up to the Union Budget as investors speculate on potential policy changes. The theme for the 2025 Union Budget is expected to focus on ‘Amrit Kaal’ and ‘Viksit Bharat’. These themes aim to drive development across multiple sectors of the economy, aligning with the vision of a developed India. The ‘Viksit Bharat’ or ‘Developed India’ vision is likely to include policy measures aimed at improving infrastructure, boosting manufacturing, and promoting digital innovation. Additionally, tax reforms, agricultural growth, and social welfare programs will likely be on the agenda.

The pre-budget phase is to be driven by expectations of growth-oriented reforms and infrastructure spending. Post-Budget, the market’s reaction will hinge on how well the announcements address key areas like fiscal consolidation, tax reforms, and capital expenditure. A pro-growth Budget could trigger a rally, while higher-than-expected fiscal deficits might dampen sentiment.

According to data available from the last ten years, the Indian market closed on a negative note in eight out of ten trading sessions on the budget announcement day.

Q2. Which sectors are likely to drive the market, any reforms in Budget 2025 expected that could be a boosting factor?

Sectors like infrastructure, capital goods, banking, and green energy are likely to drive the market in 2025. Budget 2025 is expected to focus on infrastructure development, renewable energy initiatives, and tax reforms. Any incentives for manufacturing and technology adoption under schemes like PLI (Production-Linked Incentive) could further boost market sentiment. Further, the previous budget did not bring much relief for the insurance sector and, more importantly, the consumers. However, IRDAI has committed to enabling “Insurance for All” by 2047. The upcoming budget should ideally outline measures to boost the accessibility and affordability of insurance, particularly for the middle class.

Q3. Will Donald Trump’s Return to the White House impact the Indian stock market and how.?

Donald Trump’s return to the White House will bring volatility to global markets due to his unpredictable policy stance. For India, sectors like IT and pharmaceuticals, which are export-oriented, could benefit from any relaxation in U.S. regulations. However, increased trade protectionism might weigh on emerging markets, including India. The overall impact will depend on his specific policies towards trade and international relations.

For example, the Indian export sector could get a significant advantage as higher tariffs on Chinese products may enhance the competitiveness of Indian manufacturers in areas like auto parts, solar equipment and chemical production in US markets.

His focus on strengthening US manufacturing and military capabilities could provide opportunities to Indian defence companies like BDL and HAL.

Q4. What is the technical outlook for Sensex, and Nifty in Q4FY25, and overall, 2025?

For Q4FY25, both Sensex and Nifty are expected to consolidate in the early months before resuming their upward trend. Key support for Nifty is seen at 23000 followed by the 22300-23500 range while resistance levels are around 25,000-25300. The whole of 2025 is also largely expected to be sideways with the upside to be less than 27500. Unlike the last 3 years when the majority of the stocks outperformed, 2025 is likely to be a stock picker’s year. One has to carefully separate the wheat from the chaff & focus on stocks with earnings visibility & sound fundamental background.

Q5. What’s the technical outlook for the rupee in 2025, and what factors will influence its performance?

The Indian rupee is likely to remain flat to under pressure in 2025 due to expectations of a strong dollar driven by the US Federal Reserve’s rate trajectory and US government policies under the new President. The odds are increasingly tilting towards a stronger dollar in 2025, which suggests that the pressure on INR will remain in the time to come. Technically USDINR is in unchartered territory currently, making newer highs every day.

It is in overbought territory in all time frames. While the short-term correction in the dollar may not be ruled out due to its overbought nature, the long-term fundamental view remains bullish on the same.