The Union Budget in February is the biggest and most awaited event in the Indian financial calendar. So it is worth checking how the equity benchmark indices behave in the run-up to the budget.

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The highest returns the Indian market indices delivered a month before the Union Budget in the past five years was in 2015. The S&P BSE Sensex in January 2015 rallied 6.17 percent while the Nifty50 index jumped 6.47 percent.

Five years to this day, the markets have turned volatile and gloomier due to a bunch of external and internal economic issues. On Monday, the Indian markets witnessed the worst downfall in the past three months. On an intraday basis, the Sensex plunged 726.75 points to 40,737.86 while the Nifty50 slipped 218.70 points to 12,007.95. In fact, foreign portfolio investors (FPIs) withdrew a net Rs 2,418 crore from the Indian capital markets in the first three trading sessions of January itself.

This kind of massive selling spree is being seen after a span of three years. In January 2016, the Sensex and Nifty50 plunged 4.71 percent and 4.72 percent, respectively. The same pattern can be noticed this year where the month of January has already started to see a massive chunk of profit booking.

According to the table, the markets traded lower last January as well. This time the impact is huge since the US launched an airstrike killing Iranian Revolutionary Guard Corps (IRGC) commander Major General Qassem Soleimani. This has triggered a crisis in the US-Middle East relations, a spike in crude oil and a surge in gold prices.

The years 2015, 2017 and 2018 remained the best years for the Indian bourses before the Union Budget. Although 2016 started on a tepid note, the rally later in the stock market was fuelled by the victory of US President Donald Trump and the implementation of Brexit. However, this year, the US has waged a war against the Middle East while it was trying to solve one with China.

Most brokerages remained positive in 2020 but after the airstrikes, the geopolitical situation has turned sour, and the market has already started to plunge. Since Friday, Sensex and Nifty have slipped nearly 2.18 percent and 2.07 percent respectively.

First Published:Jan 6, 2020 4:11 PM IST