Market outlook: How BSE index Sensex fared in last 13 Union Budgets; what to expect today

Benchmark largecap index Sensex delivered mixed returns on Union Budget days in the past 13 instances, including three interim Budgets. While the BSE Sensex delivered a negative return on the day of interim Budget 2024, it closed higher in a total six out of 13 instances. The 30-pack index ended flattish on three occasions while it declined in the remaining instances, data compiled from corporate database AceEquity suggest. 

On February 1, the day of Interim Budget 2024, the 30-pack Sensex inched 106.81 points, or 0.15 per cent, lower to 71,645.30. Since then, the 30-pack index has surged 8,857 points, or 12.36 per cent, to 80,502.08.

"The sharp rally in recent months has been aided by a reversal in foreign institutional investors’ flows into the positive territory and a sustained inflow into domestic mutual funds. Considering the slow start to earnings growth in 1Q, policy direction in the upcoming Budget will be key to sustain it, as the forward P/E premium of India over MSCI emerging markets has touched +2SD above the mean level," said InCred Equities.

Vinod Nair, Head of Research at Geojit Financial Services said the conservative economic growth forecast for FY25, presented in the Economic Survey, has introduced some spikes in volatility ahead of the Budget.

"Further, the below-estimated Q1 results from certain index heavyweights like RIL added to apprehensions of a slowdown in earnings growth in FY25. Although the Budget is anticipated to be favourable, investors will closely monitor whether it continues to tickle traction, given high valuations and the risk of a downgrade in earnings," he said.

Last year, on February 1, 2023, Sensex closed at 59,708.08, up 158.18 points or 0.26 per cent.

It climbed 848.40 points or 1.46 per cent on February 1, 2022. Budget 2021 was the best Budget for the stock market as the BSE barometer surged 2,314.84 points, or 5 per cent, in the single day.

Sensex fell 2.42 per cent on 2020 Budget day; it was down 0.98 per cent on the 2019 Budget which was revealed on July 5, 2019. Earlier that year, the BSE index gained 0.58 per cent on the day of interim Budget (February 1, 2019), which was presented by former Finance Minister Piyush Goyal.

The interim Budget in 2014 was presented by former Finance Minister P. Chidambaram on February 17. The Sensex settled that day, 97.24 points or 0.47 per cent higher. In the case of BSE100, the index settled higher in six instances, settled flat once and fell in six others. This largecap index jumped 4.55 per cent on 2021 Budget day.

"There is an outlier probability of negative changes in the capital gains regime which could trigger a strong sell-off and prolonged sideways market thereafter. Beyond the budget, we think the market is too complacent about the changed political scenario. Though the GoI remains stable, there could be adverse events (like a possible NDA defeat in the upcoming Maharashtra assembly elections) that could exacerbate uncertainty," Emkay Global said.

It sees the risk of an imminent 5-10 per cent stock market correction in the headline indices, with bigger drawdowns in small and midcap stocks.