Dalal Street post Budget 2022

By Pratyush Sahu

The constant fear of new covid strains made the Indian economy struggle to survive. On the other hand, the stock exchange has shown a pure bullish pattern in the past years. The major factor that led to this rally is the FII. But in recent days it has witnessed heavy Foreign Institutional Investors’ (FIIs) selling, which resulted in a bloodbath. The indices fell by over 8 per cent in the past few days. As per stock exchange data, the FIIs have sold stocks worth ₹19,315 crores in the cash segment in January so far. In the derivatives, the FIIs have sold index futures worth ₹7,515 crore and stock futures worth ₹9,424 crores in January so far, which has hurt investor sentiment.

But if we look at the Indian markets then there are lots of positive triggers that may help our market to outperform. We just need some calmness in global markets. The market is not going in the budget with any euphoria so there is a good chance of a post-budget rally and if we look at the last three years’ trend then the market corrects ahead of budget then it witnesses a post-budget rally.

Between 2013 and 2021, Sensex and Nifty have rallied on six occasions in days after the budget announcement since they were falling ahead of the budget. On three occasions, the markets have declined post-budget announcements for they had rallied ahead of the budget speech. It simply means that if markets are falling ahead of the budget, then the probability of a rally post-budget announcement is higher and vice-e-versa.

Only on one occasion in the past nine years, Sensex and Nifty fell by 0.82 per cent ahead of the budget and declined 2.21 per cent post-budget. One time in 2017, markets were up 0.28 per cent ahead of the budget and 1.89 per cent ahead of the budget.

The Union Budget 2022-23 will be presented ahead of the assembly elections in five states. Uttar Pradesh assembly election is seen crucially important. There are strong speculations that the government will come out with a populist budget to win the hearts of the voters.

Apart from the speculative trading ahead of the budget, there are several other developments that are likely to keep the markets volatile in the coming days.

The US Federal Reserve’s meeting is scheduled on Tuesday and Wednesday. The Fed action will have a huge impact on the markets globally. While the Fed has already given indication for increasing the policy rates, investors await clues from this week’s meeting on how much the rates will be increased and when it will start.

ICICI Bank announced its third-quarter results on Saturday. The private sector lender net profit rose by 25 per cent to Rs 6,194 crore during the quarter ended December 31, 2021. Directions in the scrips like Reliance Industries and ICICI Bank would have a big impact on the market on Monday. Thus, the market expects a bullish approach post-budget announcement.