With finance minister Nirmala Sitharaman scheduled to present the Union Budget 2022 today, it would be interesting to see how stock markets perform on this highly-anticipated day. Indian stock market has received mixed responses on Budget day over the last 10 years. The benchmark index, BSE Sensex has risen in the range of 0.48% to 5% in five years, while it dropped 0.16% to 2.43% during the rest five years.
Of the last 10 Budget days, the BSE Sensex closed lower six times, while it rose on four occasions. The Indian benchmark notched its best Budget day gain of 5% in 2021, the highest since 1999. Historical data suggests that Sensex reported its ten-year biggest loss of 2.43% in 2020.
Here’s how stock market reacted to Union Budget in the last ten years.
Budget 2021
Dalal Street had given thumbs up to Budget 2021, which was termed as growth-oriented and balanced by market analysts. The BSE Sensex rallied 2,300 points, or 5%, to close at 48,600, and the NSE Nifty surged 647 points, or 4.74%, to settle at 14,281. This was the best performance by the domestic bourses on a Budget day since 1999, when the index had gained 6.5%.
While presenting her third consecutive Budget, FM Nirmala Sitharaman laid out Modi government's plan for economic recovery. The Budget 2021 proposed an increase in government spending without any major change in indirect taxes. Investors cheered the government’s proposal for the privatisation of two PSU banks, push for infrastructure developments, and increase in FDI limit in the insurance sector.
Budget 2020
The Union Budget 2020, presented by Finance Minister Nirmala Sitharaman, failed to impress Dalal Street, with the BSE Sensex falling 988 points, or 2.43%, to close at 39,735. The Nifty50 fell 300 points, or 2.51%, to end at 11,662. This was the biggest fall witnessed on the Budget Day in the past 12 years.
Investors reacted negatively to the Budget 2020-21 as no major relief was announced for the stock market. The non-abolition of long term capital gain (LTCG), confusion about the impact of dividend distribution tax (DDT) removal, and alternative tax slab for individual taxpayers dented market sentiments.
Budget 2019
The benchmark indices, the BSE Sensex and the NSE Nifty, closed marginally higher as the Union Budget 2019 failed to provide any major boost to the market. The Sensex ended 212 points, or 0.59%, higher at 36,469, while the Nifty closed just short of the 10,900-mark.
The Union Budget 2019, presented by acting finance minister Piyush Goyal, proposed to increase Defence Budget for FY20 to ₹3 lakh crore, income tax sops for nearly 30 million low-income taxpayers and 120 million marginal farmers, provided a major boost to sentiments. Agriculture and auto stocks also got a boost after favourable announcements were made for farmers in Budget 2019.
Budget 2018
In 2018, the then finance minister Arun Jaitley had presented his last Budget on February 1. The stock market had reacted cautiously to Budget proposals, with Sensex ending marginally lower by 0.16%. Sentiments turned weak after the central government introduced long term capital gains tax in the Budget and also a proposal for higher dividend distribution tax on those earning more. The government also announced an increase in securities transaction tax on options and dividend tax on above ₹10 lakh dividend receipts.
Budget 2017
In the calendar year 2017, Arun Jaitley had presented the Union Budget for the first time on February 1. This was the year when Narendra Modi government scrapped the practice of presenting the Union Budget at the end of February and shifted it to February 1. The government also ended the tradition of presenting a separate Railway Budget, ending a colonial-era practice.
The market reacted positively to the Budget proposals as FM made no reference to long term or short term capital gains tax on equities. The BSE Sensex ended 1.76% higher, its highest Budget day gain between 2010 and 2019.
Budget 2016
In calendar year 2016, the Union Budget was tabled in the Parliament by Jaitley on February 29. The Sensex fell 0.66% to close above the 23,000 mark as budgetary proposals fell short of market expectations.
Budget 2015
In 2015, finance minister Arun Jaitley presented the first full-fledged Budget of PM Narendra Modi-led NDA government. The benchmark index, Sensex gained 0.48% to close higher at 29,361 points. Traders reacted positively to budgetary proposals as the government reduced corporate taxes from 30% to 25%, while it also deferred General Anti-Avoidance Rule (GAAR), an anti-tax avoidance law to curb tax evasion and avoid tax leaks.
Budget 2014
In the calendar year 2014, FM Arun Jaitley presented his first Budget on July 10 after Narendra Modi-led NDA government came to power. Sensex closed 0.28% lower after a swing of 800 points during the session. Investors gave a muted response to budget announcements such as incentives for Real Estate Investment Trusts (REITs), increasing FDI limit in the insurance and defence sector to 49% from 26%.
Budget 2013
The then finance minister P Chidambaram presented the Union Budget of prime minister Manmohan Singh-led UPA government on February 28. The Budget announcement failed to impress Dalal Street, with Sensex falling 1.5% to end below 19,000-level, registering the worst Budget day performance since 2009. The market sentiment was dented as the government imposed more taxes on companies as well as the super-rich and offered little respite to large investors.
Budget 2012
In 2012, the then finance minister Pranab Mukherjee presented his last Budget on March 16. The Sensex ended 1.19% lower after the UPA government proposed a rise in service tax and excise duty, as well as hike in the cess, which negated reduction in the Securities Transaction Tax (STT).
