The Union Budget has long been a significant influencer in the Indian market, often synonymous with heightened market volatility. Over the past 24 years, specifically during budget sessions on February 1, data reveals that only in 7 instances did the Indian market move less than 1 percent on the budget day.
In the most recent budget session on February 1, 2023, Indian indices experienced a mixed outcome after an extremely volatile session. The Sensex closed 158 points, or 0.27 percent, higher at 59,708.08, while the Nifty ended at 17,616.30, down 46 points, or 0.26 percent. Notably, this marked the first time since 2018 that Indian indices moved less than one percent on the budget day, with the market ending nearly flat in 2018, down just 0.1 percent.
Examining the historical data, the market ended 1.4 percent higher in 2022, surged 4.7 percent in 2021, fell 2.5 percent in 2020, and shed 1.1 percent in 2019 on budget day.
Analyzing the market trend on budget days over the last 24 years, negative trends occurred 15 times, with the highest fall of 5.8 percent observed in 2009. In the remaining 9 budget sessions, the market trended positively. Notably, the market gained over 4 percent on the budget day in 2 of those 9 sessions, including a 4.7 percent rise in 2021 and over 4 percent in 2001.
Considering trends pre and post the budget day, historical data indicates that in only 9 out of the last 24 years has the market moved less than 4 percent plus/minus in the post-budget month. This suggests that market volatility should be expected in the period following the budget.
Additionally, in 14 out of 24 years, the pre-existing trend reversed post-budget, indicating a historical positive bias in the pre-budget month and a negative bias in the post-budget month.
In 10 of the last 24 years, both pre and post-budget market trends were negative. Notably, in 2023, both pre and post-budget months remained in the red, with the market down over 2 percent each. A similar scenario occurred in 2022 when the Nifty fell 3 percent in Feb (post budget) and was down 0.1 percent in Jan (pre budget).
However, in 2021, the market fell 3.5 percent in the pre-budget month while it was up around 2 percent in the post-budget month. In 2020, during the pandemic, the market was in the red for both pre and post-budget months, down 1.8 percent and 3 percent, respectively.
The last time the market was in the green during the pre-budget month was in 2018 when it rose 5.6 percent. Prior to 2018, the highest market gain during a pre-budget month was witnessed in 2002 and 2000 when it rose 11 percent each. Conversely, the highest surge in the market during post-budget months occurred in 2016, up 10.75 percent.
(With Inputs)