updated on 31 Jan 2017
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Post Budget 2017: will Nifty and Sensex fall?
If past data is anything to go by, then chances of a stock market correction immediately after the Budget is quite high. In the few weeks following 19 earlier Budget announcements, since 2001 - which also include four interim Budgets - the indices as well as the broader market had changed momentum.
Indian markets have gained 9.3% from the lows of December 2016 and 5.5% since January 1, 2017. The trend seems to have been stronger under the present NDA government. The market surged in the run-up to the 2015 Budget, but fell thereafter. The reverse happened after the 2016 Budget, the market which has been falling till then rose.
Will it be different this time? Unlike the case in the past two years, traders have very little expectations from this year’s Budget - coming between two major events: Demonetisation and the UP elections.
The rise in stock prices in the last one month is partly due to large companies announcing better-than expected quarterly numbers despite the cash crunch caused by the demonetisation announcement rather than any serious expectations from the Budget.
Besides, uncertainties and speculations over the outcome of the UP polls, which begins from February 11, are keeping traders on the edge. “UP elections will control the sentiments more than the Budget. If the outcome is in favour of the BJP, it will be positive; and if not, markets will take it negatively
Among the fears and hope from the Budget are possible measures to collect more capital gain tax from equity trades and lowering of corporate tax rates. The proposed spends for sectors like farm and infrastructure along with the government’s handling of the fiscal deficit number are the prime macro indicators that would be tracked.