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It’s not a ‘Non Event’. Union budget offers triggers for D-Street

Nifty 50 had gained 2.5 per cent in the month following the 2017 Budget.

, ET Bureau|
Updated: Jan 16, 2019, 09.15 AM IST
Market data since 2014 show that Budget days often bring an inflection point for the benchmark indices. It means the indices may shrug off the range-bound movements after the ensuing Budget day on February 1.

On four out of the past five Budget days, the Nifty 50 gained or lost 5.8 per cent to 8.3 per cent in one month after the event. It had gained 2.5 per cent in the month following the 2017 Budget.

In case of the 2014 interim Budget, the indices rose after the Budget day and peaked on the Budget day in 2015 when the Nifty made a high of 9,100. Since then the downward trend continued for a year, but it reversed the direction on the 2016 Budget day after which the Nifty started to move up from under 7,000.

In the 2017 Budget, which followed the demonetization on November 8, 2016, the equity market which was trending sideways at the time started gaining after the Budget announcement and scaled a new-high in a few days after a gap of two years. The momentum continued until the Budget day of 2018, after which the trend again reversed.

Such market behaviour is contrary to the belief among economists that the Union Budget has become a non-event. The empirical data suggest that Budgets do offer sentimental triggers to market participants.

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