Analysts said traders are bracing for sharp swings around the budget announcement for FY25, the government’s final one before the national elections this year. “We have seen a negative market trend on average in the past budgets since 2012, and today’s decline too was just due to profit booking,” said Apurva Sheth, head of research at Samco Securities.
Out of the 16 budgets (14 full and 2 interim) from 2010 to 2023, the average budget day returns in Nifty has been 0.23%, said Sheth.
“While Nifty’s average returns one week before the budget is -0.58%, it is 1.37% in the week following,” he said.
On Monday, the Sensex and Nifty had risen 1.8% led by the strength in Reliance Industries, India’s most valuable company.
“We should not expect yesterday’s Reliance rally to percolate to other sectors,” said Pankaj Pandey, head of research at ICICI Direct. “With the ongoing results season, which has been decent so far, we may continue to see stock-specific movements.”Pandey said the interim budget is expected to give some “directional help” to the market. “Once the volatility is over, we may see markets heading higher once the resistance of 22,000 is broken.”Investors will watch the outcome of the Fed’s rate-setting meeting for hints on the direction of interest rates. While the American central bank is expected to keep interest rates unchanged at 5.25-5.50% — the highest since 2001 — for the second meeting in a row, financial markets are more eager to know if the Fed has intentions to ease monetary policy in March, which has been built into the stock prices. Expectations of a rate cut by the central bank in March have subsided following stronger-than-expected economic reports in the US recently.
Analysts said the near-term outlook appears to be cautious.
“If the market drops below 21,470, it could lead to more selling pressure and a further decline to levels between 21,250 and 21,100,” said Kapil Shah, technical analyst at brokerage Emkay Global. The Nifty closed only about 52 points above this key support level.
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