Budget and Markets: What History Tells Us About Sensex and Nifty 50 Moves After the Union Budget?

As Budget Day gets closer, uncertainty tends to creep into the Indian stock market. Volatility rises. Sentiment turns cautious. Price swings get sharper.

This pattern plays out almost every year.

But when we look at Budget and Markets through a historical lens, one thing becomes clear: the real market move often begins after the Budget, not before it.

A deep dive into the last 15 Union Budget cycles—including interim and full Budgets—shows how Indian equities have typically behaved once the event is out of the way. The data covers benchmark indices, broader markets, sectoral trends, and volatility.

What emerges is a familiar story of hesitation before the event, followed by adjustment and, often, recovery.

Market Performance: Benchmarks Often Find Their Footing Post-Budget

Indian equity benchmarks have shown a clear bias toward gains after the Budget announcement.

Historically, the Sensex has ended higher in the week following the Budget on 11 out of the last 15 occasions, delivering an average gain of 2.1%.

The trend doesn’t stop at the short term.

Over a three-month period, the Sensex closed in positive territory nine times, with average gains of nearly 6.8%.

The Nifty 50 mirrors this pattern closely.

• Nifty 50 rose in 12 of the last 15 post-Budget weeks
• Average gains stood at just over 2%
• Performance improved further over one- and three-month windows

What stands out is the context in which these gains appear.

In years where markets entered the Budget phase on a weak note, the rebound afterward was stronger.

Whenever the Sensex or Nifty 50 corrected more than 3% in the month before the Budget, the period following it saw recovery across:

• 1-week
• 1-month
• 3-month time frames

With both indices already down over 3% month-to-date ahead of the current Budget, historical Budget and Markets data shows a familiar setup.

Broader Markets: Faster Rallies, Uneven Paths

Beyond the headline indices, broader markets have often delivered sharper moves—but not without bumps.

Both mid-cap and small-cap indices closed higher in the week after the Budget in 11 out of 15 instances, posting average gains above 3%.

However, the path isn’t identical for both.

Mid-caps show more consistency:

• Positive three-month returns in 10 of the last 15 Budget cycles
• Recovery tends to be steadier over time

Small-caps, on the other hand, tell a mixed story:

• Sharp upside in certain years
• Extended drawdowns in others
• Recovery phases often stretch beyond three months

This uneven behaviour highlights how Budget and Markets dynamics affect different segments in different ways, especially when volatility is involved.

Sector Watch: Pharma and Financials Show Stability

Sector-wise performance after the Budget reveals noticeable patterns.

Pharma has stood out for its consistency.

• Positive returns in 14 out of 15 post-Budget weeks
• Average weekly gains of 3.2%
• Over three months, gains appeared in nearly two-thirds of the observed cycles
• Losses, when they occurred, were relatively limited

Financial services also displayed resilience:

• Positive movement in 11 of the last 15 post-Budget weeks
• In positive cycles, double-digit average gains over three months were recorded

In contrast, some sectors have struggled to find momentum.

Auto and realty have historically underperformed:

• More negative than positive outcomes
• Weaker performance over one-month and three-month windows
• Sensitivity to demand conditions, interest rates, and execution challenges played a role

These sectoral patterns add another layer to how Budget and Markets interact over time.

Volatility Trends: Calm Returns After the Announcement

One of the most consistent data points across all Budget cycles is volatility.

The India VIX, a key volatility indicator, declined on Budget Day in all 15 observed instances.

On average, volatility dropped by over 9%.

The message is clear.

Pre-Budget anxiety builds expectations and speculation. Once the event concludes, uncertainty reduces, allowing markets to reset and reassess based on actual information rather than anticipation.

Summary: What Budget and Markets History Really Shows?

The Union Budget rarely delivers instant clarity or dramatic market moves on the day itself.

Instead, history shows that Budget and Markets react through recalibration.

• Benchmark indices have shown a consistent tendency to recover post-Budget
• Broader markets often move faster, though not always smoothly
• Pharma and financials have remained relatively stable across cycles
• Volatility usually cools once the event risk is removed

The takeaway from past data is simple.

Budget Day creates noise.

The weeks after it reveal direction.

Understanding this rhythm has mattered more than reacting to headline swings—and that pattern has repeated itself, cycle after cycle.

Source: Livemint