Sensex & Budget: How stock market may react on B-Day

NEW DELHI: With the impact of the Union Budget on the stock market witnessing a waning trend, Sensex has ended the B-Day with gains or losses more than 2% only twice in 8 out of the last 10 years.

An analysis of market history since 2013, which includes 10 full budgets and 2 interim ones, shows that the Union Budget has been a 50:50 show so far with six wins and six losses for Sensex.

The market reaction has been extreme only in two instances. In 2020, before the Covid lockdowns began, Sensex ended the day with 2.4% loss as market gave a thumbs down to the announcements in Finance Nirmala Sitharaman's second Budget.



The sentiment, however, changed in 2021's budget when the Sensex delivered its best Budget day gain since 1999 by ending 5% higher.

On this day last year, Sensex had ended 1.46% higher as market participants cheered as Sitharaman increased the government capex target by 35.4% to Rs 7.5 lakh crore.

As Sitharaman presents her fifth Budget today, market experts, however, expect intra-day volatility to be high and stock-specific movements could make or break the day for traders.

"After the pandemic-induced spurt in spending, FY24 Budget expansion is likely to be a moderate one, with the economy having stabilized. From looking at the budget data of the last two decades, it is amply evident that the NDA tends to be less expansionary on the fiscal," said Amar Ambani, Group President and Head, Institutional Equities, YES Securities.

As this is the last full-year Budget before the Lok Sabha polls in 2024, analysts expect it to be growth-oriented.

"Overall, with its focus on growth and development, this Budget may have something for everyone. FMCG, manufacturing, MSME, and banking are a few sectors that may see action," said B Gopkumar, MD and CEO, Axis Securities.

After the stress on the market seen in the run-up to the event, post-budget sessions may actually turn out to be better as historical data shows that a week after the Budget, the index has delivered an average return of 1.36% in the last 15 years.

"The main reason behind this phenomenon is the uncertainty regarding the Budget. Investors tend to tread lightly before the event. Profit booking by the market participants causes the prices to plunge a week before the Budget, discounting all the fears that investors have," said Jimeet Modi of Samco Securities.

(With data inputs from Ritesh Presswala)

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