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Here is the analysis of the impact of the Union Budget on Indian Equity Markets from year 2014 to 2024
Stock Market Performance Before And After Union Budget
Budget is around the corner and Investors would be keenly watching “what’s in store”. Investors usually see the budget as a big driver for the market. Here is the analysis of the impact of the Union Budget on Indian Equity Markets from year 2014 to 2024, few observations can be seen from the last 11 budgets excluding the interim budgets during election years.
1 month Before budget the Indices have seen variance approx. -8% to +8%, however in most cases it has been closer to 3% plus or minus.
1 month After the budget day Indices have seen a variance of -10% to +13% and a change of more than 5% plus or minus in most cases.
6 months After the Budget day Indices have seen a variance of -11% to +31% and a change of more than 9% plus or minus has been seen in most cases. However, in most cases, indices have delivered decent positive returns of 10% plus, and in the rest of the cases, it’s mild negative except on one occasion.
The above numbers will become more favorable if one excludes the period of COVID-19.
We can say yes short-term indices have a tendency to see some volatility after budget but over the mid term the impact of the events resides and markets start factoring in the prevailing macro fundamentals.
Market returns have usually been better in periods where capital expenditure in the economy has been good. Historically private capex is around 85% and 15% government capex. Over the last 4 years, private capex as % of GDP has been slower and momentum has been fueled by Central Government capex rising to more than 3% of GDP.
Looking ahead with a slowdown in economic growth and global uncertainty building around tariffs and currency, expectations from the budget are building for continued growth in government expenditure on infrastructure, railways, and other capital projects to support the economy, measures to revive demand in the rural economy and to lift urban consumption.
On the taxation side, this government always focuses on tax rationalization and simplification. With past measures on taxation, we have seen an increase in the number of taxpayers, and compliance has increased in the system. We believe with tax collection being decent government has the room for increasing the tax slab to drive consumption demand. Different industries have already made their representation to the finance ministry and expectations in the form of GST cuts, import duty cuts on raw materials, and wider coverage of the PLI scheme to drive manufacturing and capex.
Indian Equity markets have seen a healthy correction over the last few months and valuations have become attractive for long-term investments, with current Nifty PEx at 21.3x compared to the last 10-year average of 23.4x. Investors who have been waiting for a correction to do fresh equity allocation can use this as an opportunity.
Written By: Mayur Shah, PMS Fund Manager, Anand Rathi Shares and Stock Brokers
Disclaimer:The views expressed in this article are those of the author and do not represent the stand of this publication.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
