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Post-Budget day: Sensex fails to hold the uptrend this year

Friday, 11 July 2014 - 7:44pm IST | Agency: Zee Research Group

The stock market has closed on a positive note a day after the Budget announcement nine times in the past 13 years. However, on July 11, 2014, a day after when Arun Jaitley has presented his first budget, Sensex hasn’t responded favourably to his pragmatic budget.

A Zee Research Group (ZRG) analysis of the market performance a day after the Budget announcement in the past 13 years showed that the Bombay Stock Exchange index, Sensex, had been in the negative territory on just four occasions.

ZRG has incorporated those budgets (not including interim ones) which have been announced at 11 am. Till the year 2000, the Union budget was announced at 5 pm, but Yashwant Sinha began a new trend by announcing it at 11 am in 2001.

During the period under review, maximum six budgets have been presented by Chidambaram followed by Pranab Mukherjee (4), Yashwant Sinha (2), Jaswant Singh (1).

Out of the six instances (Sensex performance on the next day of Budget) when Chidambaram has presented the budget, Sensex has gained on four different occasions. The Sensex had registered a maximum gain of 2.1 per cent a day after he presented his first budget under the UPA-I government.

Moreover, the biggest gain was witnessed in 2011 with the Sensex closing at 3.5 per cent higher after a day former finance minister Pranab Mukherjee presented his first budget under the UPA-II government.

Similarly, the years when the market witnessed an upward movement on the next day of Budget were, 2013 (up 0.3 per cent), 2010 (2.1 per cent), 2009 (0.9 per cent), 2007 (1.7 per cent), 2006 (1.9 per cent).

However, a day after when Arun Jaitley has presented his first budget, Sensex closed the day down 1.37 per cent at 25,024.35.

With regards to sector-wise performance in the last two days, Infrastructure, Realty, Power, Capital Goods were amongst the beneficiaries of the budgetary announcements made by Jaitley. Therefore, indices such as BSE Realty, Power, and Capital Goods have gained 5 per cent, 1.1 per cent, and 0.2 per cent respectively on the Budget day. Further, India Infrastructure Index has gained 2 per cent.

With Sensex shedding nearly 350 points on July 11, 2014 (Friday), the above mentioned indices have tumbled in the range of 3.6-5.2 per cent.

Interestingly, so far this calendar Sensex has risen by 18.2 per cent and much of the rally was due to the expectation that a stable and business-friendly government would come into power after the general elections. With the formation of Narendra Modi-led NDA government on May 16, Sensex has gained 3.7 per cent so far.

The outlook on the markets still remains bullish. A latest report published by Bank of America Merrill Lynch stated, “We maintain our index target of 27,000 by year-end though near term we could see some consolidation due to the monsoons.”

Exhibit: Sensex movement post-Budget day over the years





Finance Minister

Sensex closing on Budget day

Budget Day

Sensex closing a day after Budget

% change in Sensex movement

Yashwant Sinha

4,247.04

28-Feb-01

4,271.65

0.6%

Yashwant Sinha

3,562.31

28-Feb-02

3,678.75

3.3%

Jaswant Singh

3,283.66

28-Feb-03

3,277.27

-0.2%

P Chidambaram

4,843.84

8-Jul-04

4,945.48

2.1%

P Chidambaram

6,713.86

28-Feb-05

6,651.08

-0.9%

P Chidambaram

10,370.24

28-Feb-06

10,565.47

1.9%

P Chidambaram

12,938.09

28-Feb-07

13,159.55

1.7%

P Chidambaram

17,578.72

29-Feb-08

16,677.88

-5.1%

Pranab Mukherjee

14,043.40

6-Jul-09

14,170.45

0.9%

Pranab Mukherjee

16,429.55

26-Feb-10

16,772.56

2.1%

Pranab Mukherjee

17,823.40

28-Feb-11

18,446.50

3.5%

Pranab Mukherjee

17,466.20

16-Mar-12

17,273.37

-1.1%

P Chidambaram

18,861.54

28-Feb-13

18,918.52

0.3%

Arun Jaitley

25,372.75

10-Jul-14

25,024.35

-1.4%

Source: BSE




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