Exit Trend: Markets have been mostly subdued on Budget Day since 2012

Since 2012, major Indian stock indices have mostly reacted negatively on Union Budget Day.

According to the data, profits were mostly booked on the day the finance minister tables the finance bill in parliament. Since 2012, including ‘voting on account’, markets have returned negative seven times, ranging from (-) 0.10% to (-) 2.51%.

In contrast, markets rose only five times during the review period.

In terms of budget day, the biggest drop in the last decade was on budget day FY21, where markets crashed nearly 2.5%, while on budget day FY22 it took the most increased – 4.7%.

The current finance minister, Nirmala Sitharaman, was the minister during both budgets.

Notably, market watchers cited a pre-budget rally as the cause of profit-making bookings and the subsequent fall in markets.

In fact, budget factors such as capital expenditure, budget deficit limit, fundraising targets, investment incentives have an impact on investor sentiment.

“About 40% of the time markets end up on budget day and on sale days they end up negative,” said Deepak Jasani, head of retail research, HDFC Securities.

“It would depend on the build-up of expectations before the budget, the rise of the markets before the budget, other local and global factors that may impact markets in normal times, and finally the outcome of the budget – that it is bold, reformist, revolutionary, etc. and its provisions on capital market transactions.

Other factors that will influence the markets to loom large include the U.S. Fed’s stance, rising interest rates, inflation, geopolitical events, among others, Jasani cited.

“The market is heading into the budget with a lot of expectations and can say a pre-budget rally. So we are seeing profits on budget day or selling pressure if expectations are not met,” Santosh Meena said. , head of research at Swastika Investmart.

Additionally, Meena pointed out that this time things are different as the market “is very light and there is a pre-budget selloff instead of a pre-budget rally” due to global weakness and no negative surprises. is expected from the budget.

Since mid-January, national benchmarks have fallen nearly 6%, the data shows.

“We can expect a budget day or post-budget rally this time around similar to last year. If we look at the movement last year, there was a pre-budget sell-off, then budget day and a post-budget rally was seen,” Meena said.

According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services: “Budget can be a rally trigger if there are significant proposals like – including India in global debt indices – and adjustment capital gains tax to facilitate inclusion in global debt indices.

“However, the most important factor in determining market trends today and in the days to come would be the behavior of FIIs. If FIIs continue to sell big as they have recently (FIIs sold shares worth Rs 33,000 crore so far in January), this would be a major headwind for the markets.