After the Economic Survey 2023, markets are now eyeing Union Budget 2023 which is set to be presented on Wednesday, 1 February. Finance Minister Nirmala Sitharaman’s announcements, along with the US Fed’s interest rate hike decision, will dictate how domestic equities react tomorrow. Any favourable announcement that can boost economic growth, private investment, or consumption is likely to be cheered by investors on Dalal Street, and lead to a positive reaction from retail investors. Meanwhile, if the Budget announcements do not favour any particular sector or do not contribute to boosting income and capital expenditure, stock markets could react negatively and plummet.

How Nifty moved from Budget to Budget in last 5 years

In the last five years, the Indian share markets have typically rallied in double digits from Budget to Budget. From Union Budget 2021 to Budget 2022, benchmark Nifty 50 rallied 26?spite global equities underperforming amid headwinds such as elevated commodity prices, Russia-Ukraine war, China-Taiwan tensions, and red hot inflation. In the year prior to that, Nifty jumped 14% from Budget to Budget. The index rallied more than 10% from Budget 2020 to Budget 2021. The trend was bucked from last year’s Budget to this year’s Budget as Nifty has fallen marginally (-0.75%) in the last one year. From Budget 2018 to Union Budget 2019, Nifty slipped 1%, However, in the year prior to that, the index jumped nearly 30% from Budget to Budget.

Nifty movement before, on, and after Budget Day

According to a Samco Securities’ report that analysed the last 15 Budgets (13 full and 2 interim) from 2010 to 2022, the average budget day returns in Nifty is 0.26%. Nifty’s average return one week before the budget is -0.52% and one week after the budget is 1.36%. The average trading range (difference from day’s high to low) on the day of Budget is 2.65% in the past 15 years. Data suggests that on average, Nifty normally trades lower ahead of the budget on account of fear and uncertainty ahead of the event. The moment the Budget event is out, the market quickly discounts it and starts trading higher.

Samco Securities’ analysis shows that if the budget is not favourable, prices discount it immediately and makes an intermediate low on the budget day. If there is a positive surprise in the Budget then too it trends higher. A day ahead of the Budget, Indian benchmark indices closed in the green territory, reacting positively to the Economic Survey 2023. The BSE Sensex closed above 59,500 and the NSE Nifty 50 settled above 17,660. In the sectoral indices, Bank Nifty rose 0.66%, Nifty Auto advanced 1.89%, Nifty Metal rose 1.52% and Nifty IT fell 1.82%, Nifty Pharma fell 0.99%.