Budget & stock market: Why odds of Sensex, Nifty rallying are high after D-Day

Having lost nearly 2% in the run-up to the Budget, Sensex and Nifty are poised to end in the negative zone for the fourth consecutive month for the first time since 2001. However, historical market data indicates that whenever the expectations are low, chances are high that the Budget will surprise on the upside.

An analysis of Budgets in the last 12 years, shows that 75% of the time when Nifty delivered negative returns 1 month prior to the Union Budget, we saw an average return of 7% in the next 3 months.

"During these 12 years, 75% of the time, the week after the Union Budget has been positive for Nifty50 with an average gain of around 2.7%. In addition, 75% of the time when Nifty50 saw negative returns 1 month prior to the Union budget, we saw an average return of 7% in the next 3 months," Anand James, Chief Market Strategist, Geojit Financial Services, told ETMarkets.


In 2023, when Nifty fell almost 4% in the run-up to the Budget, it ended up giving a smart return of 6.5% in the next 3 months.

Also read | Capex hike or consumption boost in Budget 2025? 5 things Nifty bulls expect from Nirmala Sitharaman

Back in 2016 during Arun Jaitley's time, Nifty had fallen 4.4% before the Budget (one-month return) but it gave 22% return just 3 months later.

Since the Nifty has been falling for four consecutive months, the chances of a mean reversion are high.

"Out of the last 18 Budget sessions since 2010, Nifty has ended on a positive note 12 times after the Budget. Another noteworthy point is that whenever the Nifty falls more than a per cent a week before the Budget it has bounced back smartly after the budget with positive returns always," Apurva Sheth of SAMCO Securities said.

The market is entering this budget with low expectations, which could work in its favor, analysts say. Equity markets will try to rule out bad news in the budget. Even no news is likely to be good news.

"Given current market volatility, it makes sense to stay in a wait-and-watch mode over the next few days—just to ensure no unexpected negative policies come up in the budget that could further weigh on the markets," Krishna Appala, Sr. Research Analyst, Capitalmind Research, said.

The upcoming budget is expected to focus on welfare measures, agriculture, and infrastructure development, alongside a continued push for manufacturing under the PLI (Production Linked Incentive) scheme. A section of the market is also expecting measures to boost consumption by giving the middle class relief on the income tax front.

"Sectors such as agriculture, agrochemicals, infrastructure, and capital goods could see significant benefits. Additionally, renewable energy and healthcare may also gain attention as part of broader structural reforms," Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, said.

Consumption-driven industries may face a temporary slowdown if there are fewer direct stimulus measures, but a focus on rural welfare and income-boosting schemes could offset some of this pressure, she said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)