Despite the Union Budget 2025-26 announcing a significant tax relief for the middle class, the markets closed flat, prompting sharp reactions from analysts, including Wisdom Hatch founder Akshat Shrivastava.
In his assessment, Shrivastava didn’t mince words: “Markets did not rise despite the tax cut announcement. Why? This particular tax cut is a popularity move, not a sensible economic move. This does not solve the growth problem; it simply solves the popularity problem.”
Finance Minister Nirmala Sitharaman’s Budget exempted annual incomes of up to Rs 12 lakh from income tax under the new regime, alongside rejigging tax slabs to provide relief to the middle class.
While the announcement was expected to boost investor sentiment, the market’s reaction was lukewarm — Sensex edged up just 5 points to 77,506, while Nifty slipped 26 points to 23,482.
Shrivastava argued that the tax cut, though impactful for individuals, lacks the depth to influence broader economic growth or investor confidence. “It gives the feeling that at least ‘something’ is being done for the middle class,” he said, suggesting the move is more symbolic than strategic.
Breaking down the numbers, Shrivastava highlighted a key issue with India’s tax structure. He pointed out that roughly 6.5% of the country’s population files income tax returns, but only about 2% of the population actually ends up paying income tax. With the new tax cuts announced in Budget 2025-26, this number is expected to drop even further, leaving just 1% of the population effectively paying taxes.
“This does not build any kind of investor confidence,” he added, implying that the shrinking tax base could pose fiscal challenges while doing little to stimulate long-term economic growth.
Market experts echoed similar sentiments. Vinod Nair, Head of Research at Geojit Financial Services, noted the mixed market response was due to a modest 10% year-on-year increase in capital expenditure for FY26—falling short of expectations, especially in sectors like railways, defense, and infrastructure. “Consumption-based sectors, which are expected to benefit the most, had a low effect on the broad market due to their modest market mix position,” Nair explained.
Meanwhile, Ajit Mishra, SVP of Research at Religare Broking, suggested that while the Budget’s impact might linger, markets are likely to remain range-bound as participants await clearer signals. “The Nifty may remain around its current levels as market participants await the next decisive move,” he said, pointing to technical resistance near the 22,620 level.