Are bourses entering pre-Budget mode?

Mumbai: In the last 10 years, India's key equity indices have mostly been range-bound during pre-Budget days, only to bloom after the tabling of the Bill in the Parliament. In fact, the Union Budget remains the most important trigger for market movement.

Traditionally, until 2016, the Budget was announced on the final working day of February. Now it is presented in the Parliament on the first working day of February.

Accordingly, the periods just before and after assume much significance for market movement. This time around, the ongoing Covid-19 pandemic and the upcoming state elections have heightened the stakes of the Budget day. In terms of pre-Budget session, the last 10 years' data showed lower volatility as indices moved in the range of (-) 6 to 3 per cent only. As per the data, since 2011, the market has fallen five times, while gaining six times in the month ahead of the Union Budget.

Over 2011-21, the market gave negative returns in the one-month period ahead of the Budget in 2011, 2014, 2016, 2020 and 2021. Notably, in the last three years, the market started to correct between January 15 and 20, before witnessing a post-Budget rally. The trend is expected to play out this time as well.

"If we look at the current market conditions, we can see that it rallied around 10 per cent since December 20 till now, but in the next two weeks, the market may trade in sideways," said Gaurav Garg, Head of Research at CapitalVia Global Research.

Besides, healthy Q3FY22 earnings results along with fresh foreign fund flows are expected to buoy the markets further.

"The market sentiment is currently positive, mainly on account of better operating performance from top IT companies and HDFC Bank," said Rajnath Yadav, Research Analyst at Choice Broking.

According to Nagaraj Shetti, Senior Technical Research Analyst, HDFC Securities: "As per the past behaviour of Nifty since 2012 onwards, a continuation of present uptrend in Nifty is likely till the end of January."