
Budget 2025: Income tax cuts extend FMCG stocks' winning streak

Summary
- Budget 2025 focuses on boosting consumption by providing tax breaks to the middle class—a welcome relief for the sector and its stocks.
The fast-moving consumer goods (FMCG) sector welcomed the tax cuts announced in the Union Budget 2025-26 with nearly a 3% gain—its biggest budget-day gain since 2012.
The budget 2025, presented by Union finance minister Nirmala Sitharaman in the Parliament on Saturday, focused on boosting consumption by providing tax breaks to the middle class—a welcome relief for the sector facing sluggish demand.
All major packaged consumer goods ended the day in green. Britannia Industries Ltd rose 3%, Godfrey Phillips India Ltd 9%, ITC Ltd 6%, and Hindustan Unilever Ltd 4%, even as the frontline indices showed little reaction.
“The decision to forgo ₹1 trillion in direct taxes and offer full tax exemption up to ₹12 lakh income under the new tax regime is expected to boost consumer spending, benefiting sectors such as FMCG, automobiles, and retail," said Anirudh Garg, partner and fund manager at Invasset PMS.
Demand slowdown
To be sure, weak urban demand despite a pick-up in rural consumption has been a drag on the performance of major packaged consumer goods makers in the current fiscal year. Early data from the Centre for Monitoring Indian Economy (CMIE) shows real net sales growth of around 4% year-on-year (based on a rolling sample) for FMCG firms that have declared their December quarter results so far, compared to 6.3% in the year-ago period.
Also Read: Union Budget 2025 strengthens the middle class for a consumption-driven economy
The FMCG sector has traditionally outperformed on budget days, with the index rising in 70% of the last 20 budget sessions (including interim budgets), according to a Mint analysis of 13 key BSE indices.
The trend continued with the budget 2025 as the BSE FMCG Index extended gains for the sixth consecutive session, underscoring the government's commitment to post-pandemic consumption growth in India.
The government introduced several tax rationalization measures to stimulate consumption in the 2011-12 and 2017-18 budgets.
The goods and services tax (GST), introduced in the Union Budget 2014-15 and implemented in 2017-18, led to positive market reactions on both occasions, anticipating a lower final tax burden on FMCG products and a pick-up in demand.
Schemes focused on boosting agricultural productivity and rural incomes have also benefited the FMCG sector. For example, a 24% year-on-year increase in budget allocation for rural and agricultural schemes in the budget 2017-18 and provisions for climate-resistant seeds and digital infrastructure for farmers in the budget 2024-25 raised hopes for growth in the consumption sector. These initiatives fueled optimism about consumer spending, with the FMCG index climbing 2% to 4% around the respective budget announcements.
Also Read: In economy's shifting sands, a budget to boost demand
All consumer-centric indices rallied after the government's move to boost consumption and support the middle class in the budget 2025. The FMCG that led the charge earlier in the day, saw some profit booking and slipped to the second spot after realty, which posted the biggest gain of around 4%.
The other big movers of the day were the consumer discretionary and consumer durables index, which were up over 2%.
“While we definitely expect a boost in urban consumption after this budget, we will see an increase in volumes for FMCG companies only in the June or September quarter in 2025-26," said Amit Agarwal, FMCG analyst at Kotak Securities.
“Today’s reaction might be momentary, and we expect FMCG stocks to consolidate from here on until there is a material pick-up in volumes." Agarwal added.
Top consumer-oriented stocks like Swiggy Ltd, Maruti Suzuki India Ltd, Trent Ltd, and Blue Star Ltd rose 7-13% on Saturday.
Sectors that felt let down
However, the story flips for the oil and gas sector, which has demonstrated a pattern of underperformance on budget days, experiencing negative returns in 12 out of 20 budget sessions—the most frequent among all sectors. This is the fourth budget in a row that the oil and gas sector was down.
This was followed by real estate, metals, consumer durables, capital goods, banks, and information technology, which fell 11 times each on such occasions. Besides, the biggest laggards for the day were capital goods, industrials, and power.
“The market was hoping for some sort of support for the losses these OMCs (oil marketing companies) have been incurring from the government’s LPG (liquified petroleum gas) subsidies," said Vivekanand Subbaraman, lead oil and gas analyst at Ambit Capital.
Also Read: Budget 2025: Mechanism to review financial regulations paves way for responsive policies, experts say
Similarly, there was hope that both natural gas and CNG would be brought under the GST, which would improve profitability and volumes for city gas distribution companies. But since none of these measures came through in this budget, the index fell on Saturday, Subbaraman added.
In the past, the market had expected a reduction of the subsidy burden on OMCs in the budget 2009-10 and increased government support amid falling crude prices during the budget 2020-21. None of these materialized, and the oil and gas index fell 3%- 6% on these budget days.
The government presented this year’s budget against the backdrop of sluggish economic growth, consumption slowdown and a heap of global uncertainties. Given these challenges, “I think this was a very progressive, pragmatic and people-centric budget," said Raghav Manohar Narsalay, partner and leader-research and insights hub at PwC India.
“The budget recognized what was hindering Indians from spending and handed them more freedom to spend. The consumers will breathe a sigh of relief and clear their outstanding debts first while allocating resources for consumption," he added.