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The market is expecting the Union Budget to be a path-breaking one, perhaps more relevant than the one that opened up the Indian economy in 1991. But from stock market returns point of view, the Budget is a negative event if one looks at the market's performance one month prior to the event.
The performance of the benchmarks closer to the big event is clearly not very rewarding. Over the last 15 years, returns have been mildly positive three months prior to the Union Budget but these positive returns taper off closer to the event.
Elara Capital, which has done an analysis of stock market returns and the Budget, says: "In fact, since February 1999, a month prior to the Budget, the Nifty has been down 1.6%, from a month prior to the budget until D-Day on an average (since Feb 1999)." The broader markets have given positive returns on very few occasions.
Other than FMCG and IT, both are key defensive sectors, no other sector has given positive returns in the run up to the Budget (one month). Another interesting point to note is that foreign institutional investors are buyers of Indian stocks both one month prior and after the Union Budget. The only exception was the 2009 Budget.
Infrastructure stocks tend to underperform the broader markets one month prior to the Budget, but this sector has delivered positive returns, two months after the presentation of the Union Budget.
| Sectors/Indices | 1 month returns | 3 month returns |
| Auto | -1.10% | 5.60% |
| Oil & Gas | -2.20% | 4% |
| All Banks | -2.80% | 7% |
| PSU Banks | -5.90% | 2.7 |
| FMCG | 0.50% | 3.10% |
| IT | 1.20% | 3.30% |
| Metals | -1.90% | 10.10% |
| Healthcare | -1.40% | 3% |
| Infra | -5.50% | 5.20% |
| Power | -2.20% | 6.30% |
| PSUs | -2% | 8.40% |
| Nifty | -1.60% | 5.30% |
| Source: ElaraCapital | ||
