Stock market typically show volatility after the Union Budget as investors react to new policies and announcements.
Based on the past two decades, traders tend to wait about 7-8 days after the budget before actively entering the stock market. They take this time to fully grasp how the budget will affect trading, leading to a noticeable increase in buying activity afterward.
Similar patterns are anticipated before and after the Union Budget 2024 on July 23. High volatility is expected, meaning the market could experience significant fluctuations both before and after the budget is announced. Speculation runs rampant as the budget details are unknown beforehand, contributing to heightened market volatility leading up to the announcement. Emotions often drive reactions to budget announcements, further intensifying market fluctuations in the sessions following the budget reveal.
Given these dynamics, it’s advisable for risk-averse individuals to avoid substantially increasing their market exposure just before the budget. Instead, it’s prudent to wait for the budget announcements to unfold and then assess how different sectors are impacted. Making investment decisions based on this analysis can provide more informed and potentially less risky positions in the market.
Introduction to Stock Market Reactions and the Union Budget
The Union Budget is critical for the Indian stock market, impacting investor sentiment and decisions due to its fiscal policies and tax changes. While market reactions start before its announcement based on expectations, long-term market performance depends on multiple factors beyond just the budget. Investors should analyze calmly and consider various economic indicators before making investment decisions
Historical Trends
These points outline how the Indian share market historically behaved before and after the Union Budget.
- Before the budget, investors typically sell shares due to uncertainty, as observed in 63% of cases.
- After budget announcements, investors resume buying shares in 62% of instances.
- High volatility is common just before and for a few days after the budget.
- If the stock market sees a rise before the budget, it often experiences a decline afterward.
Anticipated budget announcements and their potential impact on the Stock Market.
Here are the points detailing the most expected budget announcements and how they could affect the stock market:
1. As the rural economy is facing distress, the government may announce some measures to revive agriculture and improve the skills of rural youth.
2. Startups are under the pressure of “angel tax.” The government may give them some relief by either reducing this tax or completely removing it.
3. The government may announce more support for the manufacturing of electric vehicles (EVs).
4. The upcoming budget could give a boost to infrastructure by increasing the spending on digital infrastructure, transportation, water supply, and energy.
5. On healthcare, the government may double the number of beneficiaries under the Ayushman Bharat Health Insurance Scheme. If that happens, all Indians above the age of 70 will be covered by this scheme.
Post Budget Analysis
Examining recent years, the stock market’s performance before and after the union budget reveals the following trends:
- On average, the market has shown a return of approximately -0.45% in the week leading up to the Union Budget since 2010. This negative figure indicates a cautious approach among traders, with more selling than buying during this period.
- Post-announcement, the average market return in the week following the Union Budget has been around 1.3% since 2010. This suggests that investors regain confidence and increase their market participation once uncertainties surrounding the budget are reduced
Conclusion
If you’re a stock investor, few events are as anticipated as the Union Budget. As we approach budget day (July 23), expect increased uncertainty and volatility.
For long-term investors, it’s wise to stay cautious. Avoid making significant buy or sell decisions around budget day. Instead, focus on the Finance Minister’s announcements concerning the sectors you’ve invested in.
Power of Algorithms in Options Trading, Try Spider Now: Register Now
If you’d like to know how we analyze the market and provide accurate levels every day. then click on the Free Demo button below and change your trading life for good. 5X returns are possible in options trading If you have Spider Software in your trading system.
Disclaimer: The information provided in this Blog is for educational purposes only and should not be construed as financial advice. Trading in the stock market involves a significant level of risk and can result in both profits and losses. Spider Software & Team does not guarantee any specific outcome or profit from the use of the information provided in this Blog. It is the sole responsibility of the viewer to evaluate their own financial situation and to make their own decisions regarding any investments or trading strategies based on their individual financial goals, risk tolerance, and investment objectives. Spider Software & Team shall not be liable for any loss or damage, including without limitation any indirect, special, incidental or consequential loss or damage, arising from or in connection with the use of this blog or any information contained herein.
