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Watch out: The month before Union Budget belongs to the bears

For investors seeking clues on how the markets would behave before the Union Budget on February 1, a look at the stock markets’ performance in the past few years would be useful.

Indian markets have historically been weak in the month ahead of the Budget. Though benchmark indices have risen in January so far, analysts remain unsure if the gains can be sustained amid uncertainty over policies that will be adopted by Donald Trump after assuming office as US President on January 20. The benchmark 30-share Sensex has fallen in the range of -0.2% to -7.5% in the one-month periods preceding the last 10 Union Budgets, including two the interim Budgets.

So far in January this year, the Nifty has gained 2.7% and reclaimed the 8,400-mark, while the Sensex has gained 2.4%. However, returns in the month after the Budget have largely been positive. Indices have gained in six out of the last 10 Budgets, in the range of 0.6-10.5%.

“Markets appear to be holding up around the current levels, but it may not see a significant upside from here as we believe valuations are demanding and corporate earnings are likely to be weak due to the after-effects of the recent currency exchange campaign,“ said Rajesh Cheruvu, head of equities at Sanctum Wealth Management.

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