The broader markets have outperformed benchmarks in the first month of 2021 with the midcap index rising around 2 percent and smallcap index jumping 2.8 percent as compared to a 1 percent fall in the Nifty50.

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Now, with the Union Budget 2021 around the corner, analysts expect the broader markets to further rise on the back of steep valuations among the large-cap peers.

Further, data since 2016 has shown that broader markets have outperformed benchmarks 4 out of 5 times in between budgets.

Since Budget 2020 (February 1, 2020), the Nifty has risen around 15 percent while the Nifty Midcap100 and the Nifty Smallcap indices have added 16.5 percent and 16 percent, respectively.

A similar trend was repeated in the previous budgets. Between the budgets in 2019 and 2020, the Nifty added 2 percent while the Nifty Midcap and the Nifty Smallcap indices were up 4 percent and 3 percent respectively.

However, between 2018 and 2019 budgets, when the gap was more than a year, (from February 1, 2018, to July 5, 2019), the benchmark rose 7 percent, and Midcap and Smallcap indices shed 15 percent and 29 percent, respectively. The slump in the broader markets was on the back of IL&FS crisis came to light in the second half of 2018, which adversely affected midcaps and small caps.

This was the only duration since 2016 budgets when the broader markets did not outperform the benchmarks.

Prior to this exception, between 2017 and 2018, the Nifty50 added 26 percent, the Nifty Midcap and the Nifty Smallcap rose 31 and 36 percent.

Also, between budgets in 2016 and 2017, the Nifty50 index rose nearly 25 percent, while Nifty Midcap and the Nifty Smallcap indices surged 36 percent and 46 percent, respectively.

However, the data also shows that the rise in broader market indices in between budgets have also shown a gradual decline.

(Edited by : Jomy)

First Published:Jan 29, 2021 3:19 PM IST