The after-Budget playbook: The six-month rocket fuel for market gains

If history is any guide, equity market investors have seen rewarding six-month returns following the Union Budget. Over the past 10 Union Budgets (excluding vote-on-account Budgets), the benchmark Nifty has gained an average of 8.2 per cent in the six months after Budget Day.

 

In contrast, one- and three-month returns have been relatively flat, with the Nifty delivering average gains of just 0.1 per cent and 1.7 per cent, respectively, over the past decade.

 

This time, however, markets have approached the Budget on a bearish note, having fallen more than 10 per cent from their September peak. While the benchmark indices ended flat on Budget Day (February 1), experts see positive triggers that could drive gains from current levels. 

 

  “Budget 2025-26 treads a fine balance between promoting consumption without compromising fiscal prudence and maintaining continuity in capital expenditure. The Nifty 50 earnings per share growth is expected to remain tepid at 3.8 per cent in 2024-25, but it could be much better in 2025-26E (E: Estimates). After the double-digit market correction, Nifty 50 largecaps appear less expensive (trading below one standard deviation). The bond yield premium over earnings yield suggests the market is cheaper than what price-to-earnings multiples indicate. Lastly, we believe the rate-cut cycle could begin on February 25,” said Venkatesh Balasubramaniam, managing director and co-head of research at JM Financial, in a note.