Post-Budget market effects

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Prakhar Agrawal, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

If historical data is to be believed then there are high chances of stock market corrections immediately after the budget. In the few weeks following the budgets since 2001, the indices as well as the broader market had changed momentum.
The market surged before the 2015 budget and fell immediately thereafter. The reverse happened after the 2016 budget. The market which had been falling till then rose after the budget.

Unlike the past two years, traders have very little expectations from this year’s Budget as it is coming between two major events: Demonetization and UP elections. The rise in share prices in the last month is partly due to large companies announcing better than expected quarter results than before despite the cash crunch brought brought about by demonetization rather than any serious expectations from the budget.
Also the uncertainties  over the outcome of the UP polls, which begin in February are keeping the traders worried. The traders feel that effect of UP polls will have more effect on the market than the budget.
Traders say that though anything negative will throw the market down by several points bu that will be a buying opportunity  to buy for investors. The farm and the infrastructure sectors along with the handling of fiscal deficit are the prime macro indicators that will be on the trader radars.

 

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