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Gone are the Budget day volatilities

January 20, 2023 

Traders indifferent to Budget, thanks to GST and a series of off-Budget announcements

Traders always love volatility. When benchmark indices or stocks swing at extreme ends, they make huge profit. One such traditional opportunity was Budget presentation. But, if one sees the movement of the benchmark indices in the last 10 years there is hardly any such opportunity.

Earlier, the Budget presentation day used to usher in festival-like atmosphere in stock market for three days with the presentation of Railway Budget, Economic Survey and General Budget.

Change in timing
Those days, the Union Budget was presented at 5 pm on the last working day of February as per British era practice. This ended in 1999 when the former Finance Minister Yashwant Sinha (under Vajpayee Government) decided to change the timing to 11 a.m. And, during those days, stock markets used to have two sessions — one pre-Budget trading, which used to have normal trading hours that end at 3 pm; and then between 5 and 7.30 pm (or even till 8 pm); and a special post-Budget trading session that saw a lot of excitement and turmoil at brokerages. Each and every word of the Finance Minister would be heard carefully and the indices and individual stocks reacted instantly.

While the shifting of Budget from evening killed the excess volatility, the abolition of a separate Railway Budget in 2017 further diminished the enthusiasm around the Budget-day trading.

Besides, the Union Budgets long lost their importance, thanks to a number of off-Budget announcements being made by successive governments during their tenures. The introduction of GST, which transferred the powers on indirect taxation to the GST Council, has further weaned away the charm towards Budget.

Narrow movement
If one looks at the last 10 years’ performance of Nifty and Sensex, the maximum it fell was just 2.5 per cent in February 2020 and the highest gain was about 4.7 per cent in 2022. During the other years, the benchmarks moved within one per cent range. The Bank Nifty, the traders index, also moved in narrow range during the period except for 2021 when it surged over 8 per cent.

For retail traders, it is better to avoid dabbling in derivative segments on Budget day. As the market is now looking beyond Budget presentations, it is prudent to identify sound fundamental large-cap stocks to invest in for the long term, in case of downslide on that day.

[The Hindu Business Line]