Since 2014, the Sensex and Nifty have experienced significant growth, increasing sevenfold in the one-month and three-month periods following the Budget announcement.
Sensex and Nifty: The Indian stock market is currently experiencing a correction amidst bearish sentiments, but historical data suggests that markets tend to perform well following the Union Budget.
The government is scheduled to announce the Union Budget on February 1, and investors are optimistic about market-friendly announcements. Analysis conducted by Moneycontrol reveals that equity markets have typically shown positive performance in the 1-month and 3-month periods after the Budget.
Looking back at the past 13 instances since 2014, the benchmark Sensex and Nifty have recorded gains seven times, with an average return of 3.5%. Conversely, markets have seen gains in eight cases and losses in five in the month leading up to the Budget. Following the Budget, both indices have shown gains in seven out of 13 instances.
In 2024, the interim budget in February and the full budget in July, after the election results, sparked a market rally due to the government’s commitment to fiscal deficit targets and aggressive policies. However, 2025 has presented significant challenges for Indian equity markets. Global economic headwinds and domestic obstacles have put considerable downward pressure on the markets. Year-to-date, the Sensex and Nifty have declined by over 2%, while broader indices like the BSE MidCap and BSE SmallCap have fallen by over 7% in a short period.
Domestically, economic growth has slowed, leading to a decline in India’s status as the fastest-growing major economy. Foreign Institutional Investors (FIIs) have been consistently selling off shares, amounting to over $2 billion in the current month alone, exacerbating the issue. The Indian rupee has also depreciated to record lows, further impacting market sentiment.
Despite these challenges, brokerages are optimistic that the government will maintain its fiscal deficit targets. A recent report from Goldman Sachs estimates a fiscal deficit of 4.4%–4.6% of GDP for FY26. Additionally, projections indicate that public capital expenditure growth will align with nominal GDP growth, slowing to 13% year-on-year in FY26 from over 30% between FY21 and FY24. It is expected that spending on rural welfare and subsidies will stabilize at pre-pandemic levels of approximately 3% of GDP.
Divam Sharma, co-founder of Green Portfolio, suggests that a budget allocation exceeding Rs 2.95 trillion would demonstrate an aggressive stance. Given the increasing debt-to-GDP ratios, rising interest costs, and sluggish GDP growth, the government is likely to prioritize Build-Operate-Transfer (BOT) and Hybrid Annuity Model (HAM) projects, which require lower capital outlays compared to traditional Engineering, Procurement, and Construction (EPC) models.
Shripal Shah, MD & CEO of Kotak Securities, believes that the budget should focus on boosting market sentiment amidst macroeconomic challenges. He recommends reducing capital gains tax or Securities Transaction Tax (STT) to increase domestic retail participation, attract foreign investors, curb Foreign Institutional Investor (FII) outflows, stabilize the rupee, and improve the investment climate. This would benefit both retail investors and the broking industry.
For more market insights, follow our blog.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.