14/12/2017
The month of February every year in financial parlance is usually associated with the Union Budget. Economies and markets alike are in focus around the time as the announcements during the presentation are likely to impact both these sectors.
For FY19, the date for presenting the Union Budget is likely to be February 1, 2018. On such occasions, markets on most occasions start developing a cautious stance as investors sit on the fence awaiting key announcements.
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.
the NDA government will have to take a strong anti-elite stance over the next 18 months as it fights 13 assembly elections and then the 2019 General Elections. So I expect the political rhetoric to be hostile to the interests of the capitalist class and I expect the 2018 budget to be pro-poor (a step up in subsidies which haven’t grown at all under this NDA regime) and anti-rich (new taxes on the rich)," Saurabh Mukherjea, CEO, Ambit Capital had written in a column for Moneycontrol in October 2017.
A look at data for the past 10 Union Budgets reveals some interesting details. Out of the four Budget presentations by the current Narendra Modi-led BJP government, the Nifty has collectively given positive returns on three occasions. Having said that, the Budget presented during February 2016 turned disastrous for the market. Not just for the day, the Nifty saw a big fall during the Budget month for that year as well, falling as much as 7.5 percent against gains of 1-2 percent between July 2014 and February 2017.
Looking at the big picture, however, for the Budget month of ever year in the past decade, the broader market has largely been giving negative returns, hinting at the innate negativity that is likely ahead as well. 6 out of the 10 occasions have returned negative returns, with 2007, 2016 and 2013 losing the most for the month in which the Budget is presented.
