A phase of consolidation is being witnessed on the Indian market after it touched fresh record highs this year. The indices’ rose between December 2016 and December 2017 has been phenomenal, gaining around 25 percent.

Going forward, a big event lined up for the Street apart from the earnings season is the Union Budget, which is likely to be presented on February 1, 2017. On such occasions, markets on most occasions start developing a cautious stance as investors sit on the fence awaiting key announcements.

"It is a clear case that macros not being in tune. If oil remains at these levels, it could hurt balance sheet of economy. We have to see government recourse on it. Will they go for populist measures or reforms push continue? Also, with US President Trump cutting taxes, there is talk that they could cut it here …it could be only tinkering for us. I don’t see it to be a stand out month. Before the event there could be volatility…," Sanjiv Bhasin, EVP-Markets & Corp Affairs, India Infoline told Moneycontrol.

Moneycontrol had reported earlier that on 6 out of 10 Budgets in the past 10 years, the month in which Budget was presented witnessed negative Nifty returns. Interestingly, 3 out of 4 Budgets last year were on the higher side.

A look at similar data, but in case of returns on the day of Budget in the past 10 years is also noteworthy. Out of the total 10 Budgets in the sample period, the Nifty has risen on six occasions, with gains ranging from 0.2-6 percent.

Interestingly, maximum Budget day gains were seen during the bull run between 2007 and 2007. The Nifty rose 6 percent on July 6, 2009, followed by 4 percent gain on February 28, 2007. (See Table)

On the lower side, 2010, 2011, 2015 and 2017 were the laggards, which saw negative returns of 1.27, 0.56, 0.64 and 1.78 percent, respectively.

The budget-making exercise, which is spearheaded by the finance ministry begins in September-October every year, with each ministry replying with detailed estimates of all the money they will need for the following year—for everything, from special projects to routine expenses and wages. These reams of accounts will then be distilled to form the first broad contours of next year’s Budget, which is likely to be presented on February 1 by the Finance Minister Arun Jaitley.

This will be Finance Minister Arun Jaitley’s fifth Union Budget that will sport a different look, starting with a lighter ’Part B’ with fewer indirect tax changes because of the implementation of Goods and Services tax (GST) from July 1.

"India needs restoration of the 7 percent to 7.5 percent GDP growth trajectory because we have got almost all our macroeconomic parameters right where they should be. We have managed to get inflation under control, we have also managed to get the current account deficit to very manageable levels, and we have got fiscal discipline. For a populist country like India where there is the issue of demography, job creation is extremely vital and that cannot happen unless and until we get growth back towards the 7.5-8 percent," Abhay Laijawala, Head-India Research, Deutsche Equities, told Moneycontrol.

Last year, the government had unveiled the budget a month in advance on February 1, shifting from the colonial-era tradition of presenting it on 28th of the month, in a bid to facilitate the budgeted funds by the beginning of the financial year in April. Distinction between plan and non-plan expenditure was scrapped last year, along with the merger of railway budget with the general budget, marking a shift from nearly a 100-year old practice.

 16 Dec 2017, 09:50 AM