Editor's Take | Market and the (Interim) Budget
The market reaction on the day of the Budget is amplified over the next one month in the same direction. So there is enough opportunity to participate both in the upside and the downside depending on how this day goes.
Late last year, Finance Minister Nirmala Sitharaman said that there will be no spectacular announcements in the Interim Budget. So she downplayed expectations with that one line. A lot of people in the market are latching on to the statement to mean that this Interim Budget will be just that.
There are also those, on the other side, who pointed 2019 and say that this could be a full-fledged Budget. Why not? But this view is in the minority. In any case, most expect the Budget to reaffirm government's long term vision on growth more than anything else. A focus on fiscal consolidation, especially the pace of it will be closely watched and so will the focus on capex and measures to boost consumption, which is not fully recovered, especially on the lower end.
As far as the market is concerned, January was flattish after very strong gains in both November and December last year. In that sense, with January behind, market is through with the seasonally weakest part of the year. So in that sense, it is good for equities.
The Budget day itself, usually and historically has been an extremely volatile day with big swings. So unless one is a compulsive trader on the index, the better thing to do is to let the market digest the announcements, which one will hear from the Finance Minister.
Because the market reaction on the day of the Budget is amplified over the next one month in the same direction. So if the reaction on the day of the Budget is down, over the next one month - more often than not going back the last 15 plus years - the direction is down and vice versa.
So there is enough opportunity to participate both in the upside and the downside depending on how this day goes.
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