Decoding Budget Day Trends: Indian Stock Market Performance Over 24 Years

The historical data offers valuable insights into the market's behavior on budget days, emphasizing the importance of vigilant observation and strategic planning in the face of potential post-budget volatility.

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Courtesy: ANI

The Union Budget has been a consistent trendsetter in the Indian stock market, often synonymous with market volatility. Analyzing data from the past 24 years, specifically on February 1 budget sessions, reveals intriguing patterns in market movements on budget days.

Market Moves: Less than 1% in 7 Sessions

Out of the last 24 budget sessions, only 7 witnessed the Indian market moving less than 1% on the budget day. In 15 instances, the market trend was negative, while it turned positive in the remaining 9 budget sessions.

Recent Trends: A Mixed Bag

The previous budget session (February 1, 2023) marked a departure from the usual volatility, with both Sensex and Nifty moving less than one percent. Sensex closed marginally higher, while Nifty ended lower. This was a rare occurrence, not seen since 2018 when the market ended flat, down just 0.1% on the budget day.

In contrast, 2022 witnessed a 1.4% higher market, and 2021 saw a substantial 4.7% surge. However, 2020 faced a 2.5% fall, and 2019 experienced a 1.1% dip on the budget day.

Historical Trends: A Deeper Dive

Examining trends over the past 24 years reveals interesting patterns. The market was negative in 15 budget sessions, with the steepest fall of 5.8% in 2009. Conversely, in 9 budget sessions, the market closed in the green.

Two out of those 9 sessions saw over a 4% gain on the budget day, notably in 2021 and 2001.

Post-Budget Month Volatility

Analyzing trends pre and post the budget day, only 9 out of the last 24 years saw market movements less than 4% plus/minus in the post-budget month. This suggests that market volatility should be expected post the budget.

In 14 out of 24 years, the pre-existing trend reversed post-budget month, indicating a historical tendency for positive bias pre-budget and negative bias post-budget.

Impacts of the Pre and Post-Budget Months

Interestingly, in 10 out of the last 24 years, both pre and post-budget trends were negative. Notably, 2023 and 2022 witnessed red figures both before and after the budget.

In 2021, the market fell 3.5% in the pre-budget month but rose around 2% in the post-budget month. Conversely, in 2020, both pre and post-budget months were in the red, down 1.8% and 3%, respectively.

Historical Market Gains

The last time the market showed gains in the pre-budget month was in 2018, rising 5.6%. Prior notable market gains during a pre-budget month were in 2002 and 2000, each witnessing an 11% increase.

The highest post-budget surge occurred in 2016, up by a remarkable 10.75%.

Looking Ahead to Budget 2024

With the Interim Union Budget for the financial year 2024-25 set to be presented on February 1, 2024, by Finance Minister Nirmala Sitharaman, all eyes are on the market's response. Considering the impending Lok Sabha elections, major declarations are expected to be restrained. A detailed budget unveiling will follow post-elections and the formation of a new government.

Nonetheless, the historical data offers valuable insights into the market's behavior on budget days, emphasizing the importance of vigilant observation and strategic planning in the face of potential post-budget volatility.