Fasten your seatbelt! Budgets have a history of creating market turmoils

NEW DELHI: The Union Budget might be a non-event for some, but if you were to go by history, post-Budget weeks have generally been about strong market movements on either side.

In the last seven full-year Budgets that the Modi government presented, Sensex fell up to 4 per cent post Budget on four occasions, and delivered up to 7 per cent returns in the remaining three.

Data suggests Sensex had fallen 3.44 per cent in five sessions in the runup to the Budget 2020. That included a 2.42 per cent plunge on the D-Day. That underperformance, however, got reversed within a week, with the Sensex rallying 3.53 per cent over the next five sessions. FM Nirmala Sitharaman had tabled the Budget on February 1, 202.

In 2019, Sitharaman had presented the first Budget of Modi 2.0 on July 5. While Sensex edged up 0.3 per cent in week to the Budget (including a 0.9 per cent drop on Budget day), it tanked 1.96 per cent in the week that followed.

Budget 2018 saw the 30-pack index plunge 4.16 per cent in the post-Budget week, in addition to a 0.7 per cent drop in the pre-Budget week. That Budget was presented by late Finance Minister Arun Jaitley on February 1, 2018.

In 2017, the 30-pack had already climbed 2.8 per cent in the week to Budget. It added another 0.53 per cent in the post-Budget week.

Budget 2016 had triggered the best post-Budget market performance, with the Sensex rallying 7.2 per cent in a week after plunging 3.3 per cent in the week to the B-Day. This was the first Budget to be presented on February 1.

In 2015, optimism in the week to the Budget (Sensex rose 1.33 per cent) faded away in the week that followed (Sensex down 1.76 per cent).

Budget 2014 on July 10 was the first one of Modi government. That year a 1.75 per cent fall on Sensex in the week to the Budget was followed by a 0.74 per cent rise post-Budget.

“Even though past budgets have disappointed the equity markets more often, the Finance Minister has promised a ‘landmark’ budget for FY22. Whether landmark or not, the FY22 Budget will be historic in the wake of an unprecedented pandemic that caused great economic loss. India has managed the pandemic much better than many developed economies, and the cost borne by the government has been manageable,” said Axis Securities.

The Finance Minister, the brokerage said, has been unequivocal about raising capital expenditure to revive the economy and create jobs.

“At this juncture, the Budget is expected to be quite constructive. However, the fiscal room afforded even after considering the improving economy and better-than-expected tax collections, is not significant,” the brokerage said.

Sharekhan expects positive announcements on labour laws & judicial reforms, which can support a recovery and re-ignite animal spirits.

“Measures to help iron out bottlenecks and boost industry and employment will be positive. Moreover, a multi-year roadmap for the economy and a policy framework to boost GDP and exports are likely. However, expectations are running high, which is never good news before any event,” it said.