Union Budget 2021: Share market expectation on Budget Day; key factors that will guide D-Street

Finance Minister Nirmala Sitharaman is set to present Union Budget 2021 on February 1, 2021, where she will unveil plans to boost economy battered by COVID-19 pandemic. The budget announcements made by the FM will set the tone of the stock market on February 1 and thereafter. According to market analysts, the share market is expected to remain volatile in this eventful week as the Union Budget, macro data and RBI policy would be eagerly watched by investors. Besides, ongoing corporate earnings season would also impact stock market trading.

In the last week, the 30-share BSE benchmark tumbled 2,592.77 points or 5.30 per cent as investors resorted to profit-booking ahead of the Union Budget, with domestic equity market continuing its downward journey for the sixth session in row on Friday. In last six sessions, Sensex lost 3,506.35 points or 7.04 per cent, while Nifty declined 1,010.10 points or 6.89 per cent. In pre-budget sell-off, the market wiped out Rs 11.58 lakh crore in investor wealth. On January 20, market cap on BSE stood at Rs 197.70 lakh crore which fell to 186.12 lakh crore on January 29.

Also Read: Pre-Budget sell-off: Investors lose Rs 11.58 lakh crore as Sensex falls 3,500 points in six days

Commenting on bearish trend in stock market, Vinod Nair, Head of Research at Geojit Financial Services, said, "Weakening global trend due to the concerns of speculation and slowing economic recovery has hugely impacted the cautious pre-budget domestic market. The pace of recovery in the US and Europe has slowdown, having implication on Indian exports and FII inflows."

On stock market reaction to Budget 2021, he said, "In this waning domestic trend, Budget will be the key to provide strength and perform better compared to the rest of the world. Expectations are high that the government should maintain the populist and reformist agenda of maintaining the mass sentiments, deficit discipline and growth in difficult pandemic period."

Also Read: Sensex at 50,000: What happens next?

The BSE Sensex has nearly doubled from its March 24th low before the correction seen last week. The Sensex breached the psychological 50,000-mark thanks to roll out of COVID vaccines, better-than-expected corporate earnings in third quarter of FY21 and ample global liquidity. Experts expect that further rally in the market may need the economy to regain its mojo for which the Union Budget will prove to be an ideal platform.

Meanwhile, the Economic Survey 2020-21, which was tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha on Friday, failed to impress market. The Survey, which indicates the state of the economy, projected that Indian economy may see a strong recovery in the financial year 2021-22. The survey predicted a GDP contraction of 7.7 per cent this fiscal and V-shaped recovery in the next.

As per the survey, the "V-shaped recovery is supported by COVID-19 vaccination drive."

"Now all eyes would be on the Union Budget scheduled on Monday. We believe that the Budget would focus on reviving growth and any disappointment on that front would lead to further correction in the markets," said Ajit Mishra, VP - Research, Religare Broking Ltd.

PMI data for the manufacturing and services sector as well as auto sales numbers are among other major event lined up this week. While PMI data for the manufacturing and auto sales numbers will be released on February 1, PMI data for services sector will be out on February 3.

Also, RBI policy announcement on Friday is another major event that would drive domestic market sentiments. The three-day meeting of Monetary Policy Committee, the panel which set the interest rate, will start on February 3 and conclude on February 5. As per market experts, the central bank is expected to maintain status quo and keep the monetary stance accommodative at the policy review though it will take guidance from the budget to be unveiled by the FM on February.

By Chitranjan Kumar