The Union Budget has always been one of the major trendsetters for Indian markets since forever. Budget day is usually synonymous with market volatility. As per data from the last 22 years, in only 7 budget sessions in that time, the Indian markets have moved less than 1 percent on the budget day.
Another important point to note is that in the last 22 years, 13 times the market trend was negative on the budget day with the highest fall of 5.8 percent in 2009. Meanwhile, in the remaining 9 budget sessions, the markets were in the green.
The markets have gained over 4 percent on the budget day session in 2 of those 9 sessions. In 2021, the markets rose over 4.5 percent on budget day and before that, the markets moved over 4 percent in 2001 on budget day.
Analyzing budget-related market trends, Nikhil Kamath, co-Founder, Zerodha and True Beacon, took to Twitter to share these market data.
"I'm not the biggest fan of technical analysis, but here's some data on the budget," he stated.
Kamath pointed out that in only 8 out of the last 22 years have the markets moved less than 4 percent plus/minus in the post-budget month, suggesting that market volatility should be expected post-budget.
He further stated that in 14 out of 22 years (63 percent) the pre-existing trend has reversed post-budget (pre-budget month vs post-budget month). Historically pre-budget month has a positive bias whereas post-budget month has a negative bias, Kamath added.
The table further showcased that in only 6 of the last 22 years both pre and post-budget market trends were negative.
Looking at the last few years: In 2021, the markets fell 3.5 percent in the pre-budget month while were up around 2 percent in the post-budget month.
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However, in 2020 (when the pandemic hit), markets were 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. Before, 2018, the highest market gain during a pre-budget month was witnessed in 2002 and 2000, when the markets rose 11 percent each.
However, in the post-budget months, the highest surge in the market was seen in 2016, up 10.75 percent.
In 2022, the Indian markets have been mixed in the month before the budget. While the Nifty has risen around 0.2 percent, the 30-share index Sensex is down 0.4 percent in January 2022.
The Union Budget for the financial year 2022-23 is going to be presented in the Parliament by Finance Minister Nirmala Sitharaman on February 1, 2022, at 11 am.