Market on Budget day: Frontline indices closed 7 of 12 instances in negative; how would it react this year? know experts' views

The Indian markets has briefly closed negative in 7 out 12 sessions on Budget-day, a report by Edelweiss Alternative Research said. The frontline indices rose almost 5 per cent during the session when Budget 2021 was presented – first post covid Budget. 

It should be noted that the Budget was presented twice (interim and original) in the year 2014 and 2019 owing to the general elections. 

While in the year 2020, the markets on the Budget-day had witnessed maximum decline, by 2.5 per cent, of all Budget days in the last 10 years, followed by 2013 and 2021 Budget day’s by almost 2 and over 1 per cent respectively, the research report also noted. 

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The Budget-day in 2017 was the second-best session for the market amongst all 10 years as, it had closed almost 2 per cent higher, while during the interim Budget of 2014 and 2015 saw the markets ending flat with positive bias, as it gained marginally by 0.4 and 0.6 per cent, respectively. 

Market analyst and TradeSwift Director Sandeep Jain said the performance of the market on Tuesday February 1, 2022 – Budget-day is completely dependent on how it enters or opens on that day.  

He explains that if the market opens negative following the current trend on Budget day and even the smallest positive announcement may bring back benchmarks into green and zone and vice-versa. 

The market has corrected from 100-DMA as the resistance was around 17300-400 upside and at the downside it is 16500-600, Jain said, adding further that the current call-put ratio has 500-550 7-days premium, and markets are expecting a move of 500 points.  

“The budget day are known to be the volatile days and this year, the volatility has been higher due to the Fed decision, Ukraine & Russia war, dollar index above 97 and United States 10 years bond yield above 1.8 per cent, Brijesh Bhatia- Senior Research Analyst at Equitymaster. 

There is no surprise that the volatility is likely to stay higher on Budget Day too, the analyst at Equitymaster further said.  

“The rally in the first half of January is held strong as index retraces by 78.60 per cent Fibonacci level. The more convincing is the bullish piercing candlestick pattern formed right at the Fibonacci level suggests the bulls are in control of trend,” Bhatia explained the technical levels of the markets. 

He suggests, “Traders should look for buying opportunity on dips to 16,850-16,950 zone on the budget day. The technical setup holds strong till Nifty doesn’t close below the 16,410 marks.” 

On sectorial opportunity, auto index can surprise by hitting new all-time high, while realty and infra is worth keeping on watchlist on the Budget-day, he advises further. 

Similarly. TIW Capital Group’s managing partner Mohit Ralhan said, “The market goes through elevated levels of greed and fear during the weeks just before and after the budget leading to volatility. Typically, expectations build up results in a pre-budget rally, which then corrects to normalized levels after budget announcements.” 

All on all, the budget day specifically has been a mixed bag, the market analyst Ralhan also said, adding further that the circumstances surrounding each budget is different and the market behaviour leading up to the Budget day will be keenly watched.