New Delhi: The stock market has put up a disappointing show in a month after the Budget announcement seven times in the past 10 years, but analysts have opined that this time the government’s move on policy reforms may provide a positive surprise.
An analysis of the market performance one month prior and a month after the Budget announcement in the past 10 years by Morgan Stanley showed that the Bombay Stock Exchange index, Sensex, had been in the positive territory on just three occasions.
“The market may provide a positive surprise since we expect the finance minister to deliver a reform-oriented Budget,” the report by Morgan Stanley stated.
Last year, the Sensex had dropped nearly 7% a month after the announcement of the budget on 29 February 16,300 points from 17,579 points on the budget day.
Similarly, the years when the market saw a decline a month after the budget announcement were, 2007( down 0.4%) 2005 (3%) 2003 (5%), 2002 (2.6%), 2000 (7.5%).
In 2001, the index had plunged the highest by 11.4% a month after the budget announcement, the data showed.
Despite the history not favouring an upward movement in the market in the month after the budget announcement, Morgan Stanley’s India strategist Ridham Desai opined that this time history may not necessarily be relevant.
The benchmark index had actually surged after budget announcement in 1999, 2004 and 2006. The index had gained as much as eight per cent in 1999, 7.3% in 2004 and 6.9% in 2006, the data showed.
“We are bullish on the budget as the government is likely to put up an investor friendly announcement. And despite some surprises, the budget is likely to lift up market sentiment,” Geojit BNP Paribas Financial Services Alex Mathews Research Head said.
In 2006, the Sensex crossed the 11,000 level a month after the financial document was tabled in Parliament from around 10,000 levels on the budget day. While, in 2004 the index had crossed the 5,000-mark from around 4,800 levels prior to the event, the analysis revealed.
Mathews said as the disinvestment programme depends on a positive momentum in the market, the government is unlikely to disturb the growing investor confidence by any drastic steps.
“We think the budget will provide positive signals, indicating the government is keen to make progress in policy reforms,” the Morgan Stanley report stated,
However, Bonanza Portfolio assistant vice president Avinash Gupta prefered to maintain a neutral outlook on the market performance post the budget.
“Market has already built in expectations from upcoming budget and most of the movement is likely to be sector specific depending upon the announcement.”