Indian stock market dips today, but history shows positive trend in 6 out of 9 post-Budget sessions
Although the Indian markets ended today’s trading session in the red, with Nifty 50 and Sensex losing 0.50% of their value, they both ended positively in the majority of post-budget sessions.
The Union Budget, which is also referred to as the Annual Financial Statement in Article 112 of the Constitution of India, is a major event for the domestic equity markets, as it has the power to shape the market direction for the following financial year.
Decisions made in the budget regarding capital expenditure, tax changes, and social welfare programs can have a wider impact on different sectors and industries. It also has the power to change the standard of living of citizens, boost employment, and enhance the country's competitiveness on the global stage.
In some cases, the budget may meet market expectations, leading to a strong rally in stocks, while in other cases, the market may be disappointed when the announcements do not meet expectations, which can lead to a downturn in stocks.
However, it's important to note that while the budget sets the tone, other global factors such as geopolitical events, currency fluctuations, and global economic trends also play a significant role in shaping market movements following the budget day.
The Union Budget is presented by the Union Finance Minister in Parliament every first day of February. Earlier, the budget was presented during the last day of February, but this was changed in 2017 to allow the government to complete the parliamentary approval process by March-end and allow implementation of the budget from the start of the fiscal on April 1.
Interestingly, the budget presentation timing was also changed to 11 a.m. in 1999 from 5 p.m., which followed a colonial era practice when the announcements could be made in London and India at the same time.
Each year, Indian markets typically react swiftly to the announcements made in the Union Budget, with the immediate next day’s performance often serving as a barometer of investor sentiment.
To provide a clearer picture of these reactions, we have analysed the performance of Indian stock indices on the day following the Union Budget announcements over the past decade, i.e., from 2016 to 2025.
Markets show enthusiasm in majority of post-budget sessions
Although the Indian markets ended today’s trading session in the red, with Nifty 50 and Sensex losing 0.50% of their value, they both ended positively in the majority of post-budget sessions.
Over the last nine annual budgets, both Nifty 50 and Sensex have ended six of them in positive territory in the post-budget trading session, with February 2021 recording the biggest intraday gain following the budget, at 2.57%. The worst was recorded in 2018, when the front-line indices crashed over 2%.
Meanwhile, today’s drop in the indices was attributed to concerns over weak capex announcements in the budget, coupled with the US President’s tariff announcements on trading partners, which have impacted investor sentiment, leading to a sharp drop in stocks across the board.
The Union Budget 2025 took the markets by surprise with announcements on both capex and income tax. As expected, the government targeted falling consumption, particularly in urban India. To boost this, Union Finance Minister Nirmala Sitharaman announced that no income tax would be levied on incomes up to ₹12 lakh.
Prior to the budget, there was widespread anticipation that the FM would offer relief to middle-class consumers by raising the tax exemption limit to ₹10 lakh and adjusting tax rates across various slabs.
On the capex front, the Union Budget raised the capex target to ₹11.2 lakh crore, which is lower than expected. Industry insiders had been expecting the government to raise the capex allocation to ₹11.5 lakh crore, up from ₹11.1 lakh crore a year ago.
Further, the budget has revised the capital expenditure (capex) estimate for FY25 to ₹10.18 lakh crore, which led to sharp sell-off in capex related stocks.
Disclaimer: We advise investors to check with certified experts before taking any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High