Amidst higher valuations, analysts suggest that the upward momentum in the Indian stock markets may not wane leading up to the interim budget next month, despite a 1 percent decline in the first seven sessions of 2024.
The previous year witnessed significant market surges, with the BSE Sensex and NSE Nifty marking gains of up to 20 percent, while mid-cap and small-cap indices soared by 48 percent. Factors contributing to this surge included positive sentiments before the election, improved macroeconomic conditions, and expectations of interest rate cuts.
As market participants anticipate continued government spending on infrastructure and efforts to attract private sector funds, analysts warn of increased market volatility ahead of the interim budget and the impending earnings season in the coming weeks.
The upcoming budget is anticipated to be modest, lacking major announcements due to its interim nature in an election year. Set to be the 12th budget of the BJP-led Narendra Modi government since May 2014, historical trends indicate that government policies outlined in budgets significantly influence private-sector investments, impacting market dynamics.
Finance Minister Nirmala Sitharaman is slated to present the interim budget on February 1, the last one before the general elections scheduled for May 2024.
Nifty and Budget
| Budget Date | One Month Earlier | Three Months Earlier | Six Months Earlier | Budget Announcement Day | One Month Later | Three Months Later | Six Months Later |
| 01-Feb-23 | -3.19% | -2.42% | 1.26% | -0.26% | -0.12% | 3.02% | 12.13% |
| 01-Feb-22 | 1.28% | -1.42% | 7.87% | 1.37% | -6.14% | -2.89% | -1.35% |
| 01-Feb-21 | 1.87% | 20.89% | 28.64% | 4.74% | 6.75% | 2.47% | 11.23% |
| 01-Feb-20 | -5.05% | -1.92% | 7.36% | -2.51% | -4.54% | -20.31% | -4.80% |
| 05-Jul-19 | -1.75% | 1.24% | 10.10% | -1.14% | -8.03% | -4.21% | 3.14% |
| 01-Feb-19 | 0.94% | 3.23% | -4.11% | 0.58% | 0.86% | 7.63% | 2.06% |
| 01-Feb-18 | 5.50% | 5.40% | 9.44% | -0.10% | -5.97% | -2.71% | 3.08% |
| 01-Feb-17 | 6.56% | 2.73% | 0.38% | 1.81% | 2.08% | 6.85% | 15.61% |
| 01-Feb-16 | -5.11% | -6.26% | -11.81% | -0.10% | -2.48% | 3.31% | 14.30% |
| 28-Feb-15 | -0.56% | 3.65% | 10.89% | 0.65% | -4.60% | -5.26% | -10.70% |
| 10-Jul-14 | -1.16% | 11.68% | 22.63% | -0.23% | 0.77% | 3.63% | 7.39% |
| 17-Feb-14 | -3.01% | -2.10% | 14.54% | 0.41% | 7.42% | 19.60% | 29.65% |
Overall, the data suggests that the Nifty 50 has tended to perform well in the months after the Union Budget. However, there is no guarantee that this will continue in the future. Investors should always do their own research before making any investment decisions.
Sensex and Budget
| Budget date | One month Earlier | Three months Earlier | Six months Earlier | Budget Announcement day | One Month Later | Three months Later | Six months Later |
| 01-Feb-23 | -2.39% | -1.85% | 2.26% | 0.27% | 0.17% | 2.76% | 11.42% |
| 01-Feb-22 | 1.04% | -1.52% | 8.02% | 1.46% | -6.39% | -3.21% | -1.27% |
| 01-Feb-21 | 1.53% | 20.71% | 29.04% | 5.00% | 5.85% | 0.24% | 8.95% |
| 01-Feb-20 | -4.54% | -1.07% | 8.27% | -2.43% | -4.01% | -20.18% | -5.03% |
| 05-Jul-19 | -1.42% | 1.68% | 10.70% | -0.99% | -7.12% | -3.56% | 4.54% |
| 01-Feb-19 | 1.61% | 4.16% | -2.89% | 0.59% | -0.07% | 6.89% | 2.77% |
| 01-Feb-18 | 6.19% | 6.59% | 11.08% | -0.16% | -6.02% | -2.03% | 4.73% |
| 01-Feb-17 | 5.81% | 2.59% | 0.23% | 1.76% | 2.45% | 6.32% | 15.54% |
| 01-Feb-16 | -5.11% | -6.64% | -12.04% | -0.18% | -2.34% | 2.47% | 12.80% |
| 28-Feb-15 | -1.08% | 2.33% | 9.28% | 0.48% | -4.72% | -5.22% | -10.66% |
| 10-Jul-14 | -0.82% | 12.13% | 22.23% | -0.28% | 0.58% | 3.44% | 6.36% |
| 17-Feb-14 | -2.85% | -2.04% | 14.29% | 0.48% | 6.69% | 19.05% | 28.96% |
Examining the market performance before and after previous budgets, it’s observed that in the past 11 budgets under the Modi government, both the BSE Sensex and Nifty experienced fluctuations. The indices fell five times and six times, respectively, before the budget presentation, with similar trends continuing after the budget announcement.
Historically, budget measures have helped mitigate the impact of pandemics on private sector balance sheets, leading to substantial market gains.
Analyzing specific budget years, the biggest gains for the Sensex and Nifty were observed in 2021, with advances of about 21 percent. In contrast, single-digit returns were recorded in 2015, 2017, 2018, and 2019, ranging from 2.3 percent to 6.6 percent.
Looking ahead to Budget 2024, expectations point to the possibility of populist measures, especially with a full-fledged budget anticipated in July. As the market awaits government initiatives, the upcoming budget and subsequent policies are poised to play a crucial role in shaping India’s economic landscape in the coming months.
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