As Finance Minister Nirmala Sitharaman prepares to present the Union Budget for 2024-25 on Tuesday, July 23, the Indian stock market has shown significant volatility around budget announcements. Historical data reveals that in eight out of the past ten budget announcement days (February 1), the market closed negatively.

Recent Market Movements

On February 1, 2024, the BSE Sensex dropped by 106.81 points (0.15%), closing at 71,645.30. The NSE Nifty declined by 28.25 points (0.13%), ending the day at 21,697.45. In contrast, the previous year saw mixed results, with the Sensex gaining 158 points (0.27%) to reach 59,708.08, while the Nifty fell by 46 points (0.26%) to 17,616.30. This was the first time since 2018 that Indian indices moved less than one percent on budget day.

Historical Performance on Budget Day

Year Nifty Performance on Budget Day (%)

2024 -0.13

2023 -0.2

2022 1.4

2021 4.7

2020 -2.5

2019 -1.1

2018 -0.1

2017 1.8

2016 -0.6

2015 0.6

2014 -0.2

In two of the last nine sessions, the market surged by more than 4% on budget day. Notably, in 2021, the market rose by 4.7%, and similarly in 2001, it also saw a significant increase of over 4%.

Pre- and Post-Budget Trends

In 2023, both the pre-budget and post-budget months saw declines, each falling by over 2%. In 2022, the Nifty dropped by 3% in February (post-budget) and by 0.1% in January (pre-budget). The market experienced a decline of 3.5% in the month leading up to the budget in 2021, followed by a 2% increase post-budget.

During the pandemic in 2020, the market declined in both the pre- and post-budget months, falling by 1.8% and 3%, respectively. The last positive pre-budget month was in 2018, with a 5.6% increase. Earlier notable gains occurred in 2002 and 2000, each with an 11% rise. The most significant post-budget month surge was in 2016, with a 10.75% increase.

Market Ahead of Union Budget 2024-25

On Monday, July 22, 2024, the Indian stock market benchmarks, the Nifty 50 and the Sensex, ended in the red ahead of the Union Budget. The Nifty 50 dropped by 22 points (0.09%) to close at 24,509.25, while the Sensex fell by 103 points (0.13%) to settle at 80,502.08. Despite this, the mid and small-cap segments showed healthy gains, indicating investor confidence in these sectors.

“Nifty witnessed a volatile session before the much-awaited budget announcement day, which would be the deciding factor for the further directional trend of the indices. The Nifty index would have crucial support at the 24,150 zone, while a decisive breach above 24,800 levels would trigger further upward movement in the coming days,” said Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher Pvt. Ltd.