How market fares around Budgets

Since the Budget announced on February 1, 2025, Indian equity markets have maintained an upward trajectory, navigating intermittent bouts of volatility with relative resilience. The Nifty 50 Total Return Index advanced 9.5 per cent during this period, closely followed by the , which gained 9.3 per cent. In contrast, the Nifty Smallcap 250 TRI underperformed, posting a modest decline of 1.5 per cent, reflecting continued risk aversion at the broader end of the market.

Market momentum was underpinned by steady domestic economic growth, upward revisions to GDP forecasts and sustained government-led capital expenditure, which lent support to few cyclical sectors.

However, these positives were partly offset by persistent foreign institutional investor outflows, a weakening rupee and global trade uncertainties—factors that weighed on sentiment and triggered periodic corrections. At the sectoral level, metals, PSU banks, and defence stocks emerged as top performers, benefiting from the capex cycle and policy support. On the other hand, real estate, media and FMCG stocks lagged amid valuation concerns and softer consumption trends.

Past Budgets

An analysis of Nifty 50 returns before and after Budget announcements over the last 15 instances suggests that the Budget Day itself has rarely been a decisive market event. One-day returns on Budget Day have typically been small and inconsistent, exhibiting a mild negative bias across years.

Of the 15 Budget Days analysed, 10 delivered negative returns. Budget Day performance is measured using the open-to-close returns of the Nifty 50 Price Return Index. This indicates that the immediate market reaction is driven more by sentiment and headline interpretation than by any durable shift in fundamentals.

The equity market has often displayed signs of short-term fatigue ahead of Budget announcements. One-month pre-Budget returns were negative in 10 out of 15 instances, even in years when the preceding three- or six-month performance was strong (for example, February 2021 and February 2024). However, the pre-Budget returns for the forthcoming February 2026 Budget (for the mentioned periods) were tepid.

Post-Budget performance, however, presents a constructive picture. While the first month after the Budget is frequently volatile and directionless, returns over the subsequent three-six months have shown a positive bias in many years (for example, February 2023 and February 2024).

Importantly, periods of sharp underperformance leading into the Budget have often been followed by strong recoveries over the next six months (notably February 2016 and February 2023).

Overall, broader market cycles appear to matter far more than the Budget itself. The data reinforce the view that Budgets tend to generate short-term volatility rather than alter medium-term trends.

For investors, this supports disciplined investing approaches such as SIPs and cautions against attempting to trade Budget Day outcomes.

Published on January 31, 2026