The next two weeks are set to be turbulent for Indian stock markets as they anticipate and react to Finance Minister Nirmala Sitharaman’s budget proposals for the fiscal year 2024-25 (FY25). Analysts also expect the June quarter corporate earnings season (Q1-FY25) to drive stock-specific movements and impact overall market sentiment.
Despite the immediate fluctuations, analysts note that the budget’s influence on medium-to-long-term market performance is waning. According to a Morgan Stanley report, pre-budget market performance plays a crucial role in shaping immediate post-budget reactions. Historically, the market tends to fall on two out of three occasions within 30 days after the budget announcement.
“The probability of a market decline increases to 80% if there is a rise in the 30 days preceding the budget. Only twice in 30 years has the market seen gains both before and after the budget. This year, with India tracking higher both in absolute and relative terms, a correction post-budget day is highly likely if this trend continues,” wrote Morgan Stanley analysts, led by Ridham Desai, head of India research and equity strategist, along with co-authors Sheela Rathi and Nayant Parekh.
