New Delhi is buzzing with anticipation as the Union Budget 2026-27 approaches in just a few days. Historical data reveals a consistent pattern: stock markets often face pressure in the lead-up to this major event. From 2010 to 2022, indices like the Nifty have shown negative returns in the week before budget day, averaging a -0.52% dip. Investors close out positions only 8 times positively out of 15 years, driven by fears of policy shocks.
This pre-budget volatility isn’t new. Markets exhibit heightened intraday swings, averaging 2.65% on budget day itself. Experts attribute this to uncertainty over tax changes, spending shifts, and fiscal announcements. Yet, relief often follows: post-budget weeks see an average 1.36% rally as clarity emerges.
Recent trends reinforce this. In the last five years, Nifty declined in four pre-budget months, including January 2025. Rahul Sharma, Head of Technical and Derivatives Research at JM Financial Services, notes expectations for balanced fiscal policies amid global pressures like US tariff hikes under President Trump.
Focus areas include ramped-up capex in infrastructure, defense, and railways to shield the economy. Industry demands push for MSME support, manufacturing boosts, green energy, AI, and exports via faster GST refunds and logistics investments. Fiscal deficit is projected at 4.4% of GDP, aiming for $5 trillion economy through job creation and rural demand.
Risks loom large, however. High valuations, FII selling, and AI bubble concerns could derail Nifty’s rally past 29,000. Geopolitical tensions, rupee volatility, and implementation delays add to woes. If budgets disappoint on relief or fiscal targets, selling could spike, hiking rates and liquidity crunch.
Care Ratings forecasts FY26 deficit at 4.4% GDP, easing to 4.2-4.3% in FY27, with gross borrowing at 16-17 lakh crore and net at 11.5-12 lakh crore. Experts advise holding cash until post-budget clarity, focusing on defense and PSU banks for selective bets.