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HomeNewsIndian NewsBudget 2024 in Focus: Charting the Course for Market Trends

Budget 2024 in Focus: Charting the Course for Market Trends

Budget 2024

udget

After the budget, markets and indexes adapt to policy announcements but quickly return to the global trend.

Highlights

  • Markets sometimes fluctuate before and after budget day as traders take positions based on assumptions and rumors.
  • The past decade has seen less predictability and more erratic moves before and after the budget.
  • Indian marketplaces quickly adopt budgetary changes and global patterns.

At the start of each year, Indian markets prepare for the ‘event of the year’—the finance minister’s budget in Parliament. The Indian financial ecosystem watches this budget presentation the most.

Budgets are seen as major events that shape Indian markets. Traders often start positions a month before the budget, anticipating major developments. They then address post-budget developments.

Market movements one month before, on, and after the budget are shown in the table below.

Nifty price changes before and after the budget appear unpredictable, as shown in the chart. The trend before the budget often flips, surprising traders.

Budget announcements are quickly incorporated into the market days before the trend. What matters is detecting this pattern.

We compared Nifty’s performance to Dow Jones’s to understand the budget’s influence.

Two budget months are represented by boxes. In the past decade, Nifty has outpaced the Dow Jones in 12 budgets, including two interim ones. The month before the budget may be off, but subsequently, the markets tend to move together.

International markets usually move together, unless in countries with economic problems. India outperforms others when the global market rises due to its strong economy.

In the stock market, companies with solid fundamentals and stronger relative strength than the index outperform. Traders often invest in the strongest sector’s top stock.

The February 2023 budget shows that betting ahead of the budget pays well. The budget day saw several traders who were short previously boost their positions. After Hindenburg’s scathing report, most short positions targeted Adani Group companies.

Despite the finance minister’s well-received budget, the Adani Group issue caused a market fall on budget day, followed by a recovery the next day. After a brief rise for budget plans, the market returned to global trends. After March 2023, all global markets recovered sharply.

Fund flows affect global markets, and budget days are progressively losing their effect despite periodic modest adjustments. A few days following the budget, markets and indices respond to policy announcements but return to the global trend.

Even demonetisation, which many analysts predicted would be a doomsday event, was absorbed within days and Indian markets joined the global surge.

Budgets are only small blips in the trend. Budget days may lose importance if the government releases policy throughout the year instead of just on one day.

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Two budget months are represented by boxes. In the past decade, Nifty has outpaced the Dow Jones in 12 budgets, including two interim ones. The month before the budget may be off, but subsequently, the markets tend to move together.International markets usually move together, unless in countries with economic problems. India outperforms others when the global market rises due to its strong economy.In the stock market, companies with solid fundamentals an

d stronger relative strength than the index outperform. Traders often invest in the strongest sector’s top stock.The February 2023 budget shows that betting ahead of the budget pays well. The budget day saw several traders who were short previously boost their positions. After Hindenburg’s scathing report, most short positions targeted Adani Group companies.Despite the finance minister’s well-received budget, the Adani Group issue caused a market fall on budget day, followed by a recovery the next day. After a brief rise for budget plans, the market returned to global trends.

After March 2023, all global markets recovered sharply.Fund flows affect global markets, and budget days are progressively losing their effect despite periodic modest adjustments. A few days following the budget, markets and indices respond to policy announcements but return to the global trend.Even demonetisation, which many analysts predicted would be a doomsday event, was absorbed within days and Indian markets joined the global surge.Budgets are only small blips in the trend. Budget days may lose importance if the government releases policy throughout the year instead of just on one day.

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