Since the year 2010, Indian equity barometer Sensex has fallen 7 times while gained 4 times in the month ahead of Union Budget.
The entire month’s performance just before the Budget every year is important as it explains the trend and sentiment of the market ahead of the key policy event.
Data available with Ace Equity showed that Sensex has given negative returns in the one-month period ahead of Budget in the years 2010, 2011, 2013, 2014, 2015, 2016 and 2020.
The year 2020 surprised investors. After a steep fall in March 2020, the market showed remarkable resilience and concluded the year with double-digit gains.
The market is in the green in the current year so far, but Sensex scaling the 49,000-mark and Nifty50 touching 14,500 levels ahead of the Budget 2021 could make anyone cautious about the strength of the rally.
Back in January 2020, both Sensex and Nifty touched fresh highs ahead of Budget, and then the market fell like a pack of cards.
Experts are of the view that a repeat of 2020 or the fall of March might not be possible but yes some consolidation cannot be ruled out.
The BSE Sensex closed with gains of 0.5 percent, while the Nifty was up 0.6 percent for the week ended January 15. BSE midcap and smallcap indices ended 1.2 percent down.
This hints at a slight shift in the sentiment. Experts say profit booking could extend in the small and midcap space in the run-up to the Budget as money will move from broader markets to defensives.
“Going forward, US stimulus, earnings season and Budget expectations could determine the market movement. We expect the Nifty to trade with positive bias from here till the Budget,” said Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities.
The Budget 2021 is expected to focus on infrastructure, healthcare and manufacturing.
For 2021-22, Finance Minister Nirmala Sitharaman has said that the Budget will see a massive public sector investment and expenditure push, including on infrastructure projects and the health sector.
She has also said that fiscal considerations will be kept aside. This means that a disciplined approach is unlikely next year.