Budget 2025: Brace for high volatility! Market moved less than 1% in just 8 of last 25 budget sessions

The Union Budget has consistently been one of the most influential events shaping the Indian stock market. Budget day is often associated with heightened volatility, with historical data from the last 25 years (since the February 1 budget was introduced) indicating that only on eight occasions during this period did the Indian market move less than 1 per cent on the budget day.

Market Performance on Budget Days

In the previous budget session (February 1, 2024), Indian indices experienced significant volatility before closing on a weak note. The Sensex declined by 106.81 points or 0.15 per cent to settle at 71,645.30, while the Nifty closed 28.25 points or 0.13 per cent lower at 21,697.45. This marked only the second instance since 2018 when Indian indices moved less than one per cent on budget day. In 2018, the market remained flat, ending with a marginal decline of 0.1 per cent.

Meanwhile, in 2023, the market ended on a mixed note, with the Sensex rising 0.27 per cent and Nifty shedding 0.26 per cent.

In contrast, 2022 saw the market closing 1.4 per cent higher, while in 2021, the market surged 4.7 per cent on budget day. However, in 2020, the market fell 2.5 per cent, and in 2019, it registered a decline of 1.1 per cent.

Over the past 25 years, the market has exhibited a negative trend on budget day on 15 occasions, with the sharpest fall of 5.8 per cent recorded in 2009. Conversely, in the remaining ten budget sessions, the market ended in positive territory.

Among the ten positive budget sessions, the market posted gains exceeding 4 per cent on two occasions. In 2021, the indices surged by 4.7 per cent, while the last instance of a similar rally occurred in 2001 when the market advanced over 4 per cent on budget day.

Looking Ahead: Budget 2025-26

The Union Budget 2025 is scheduled to be presented in Parliament by Finance Minister Nirmala Sitharaman on February 1 at 11 am. Given the historical trends, market participants are likely to brace for volatility, as the budget remains a key driver of investor sentiment and market movement.

As the Union Budget 2025-26 nears, the government faces key challenges, including sluggish growth, rising welfare costs, and the need for capital investment.

“The Budget’s influence on equity markets has declined as major reforms are now implemented beyond the Budget. H1FY25 saw reduced government spending, tighter credit conditions, slowing urban consumption, extended monsoons, and inflation—factors that impacted corporate earnings. Given this backdrop, investors view the FY26 Budget as pivotal for economic revival. It is expected to reinforce the 'Viksit Bharat' vision for 2047, continuing the transformation of the past decade,” said Axis Securities.

The brokerage further believes that a balance between infrastructure and social reforms is anticipated. It pointed out that the success of Maharashtra’s 'Ladki Baheen Yojana' highlights a shift towards welfare-focused policies.

"While infrastructure investments have driven growth over the last decade, lower allocations to social schemes have led to rural distress. Future budgets may emphasise welfare programs while maintaining economic expansion. Taxpayers could see minor relief, alongside policies to bolster agriculture and farm incomes. Government initiatives like Atmanirbhar Bharat, Make in India, and the PLI scheme are expected to receive further support. A well-balanced approach between infrastructure and social spending is crucial for sustaining growth," it further stated.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.