The Budget Effect- Key ObservationsThe market often reacts to major political or economic events, with people setting high expectations. These expectations, whether positive or negative, lead to wild market swings and hence higher volatility. However, when you take a look at the Nifty’s long-term chart, you’ll see that the impact of such events tends to be pretty small within the overall market structure. During a strong bull market, the market usually absorbs a big negative news. There might be a short-term dip, but within a few weeks or months, things typically stabilize, and the market resumes its upward trend.
With the budget announcement coming up tomorrow, here are some key observations based on the budget’s impact on the market over the last five years, both in the short-term and long-term perspective:
🔘 Budget Week Trend: The market has generally closed higher in the budget week (meaning the close was above the open), except in 2020 when it ended in the red. Based on this, there are good chances that the market could close green this week as well.
🔘 Post-Budget Market Behavior: After the budget news, the market has mostly resumed its prior short-term trend, except in 2020. Here’s a quick note of what happened in previous years:
2021: The market consolidated for 11 weeks before bouncing back and resuming into its strong bull trend.
2022: The market was in a bearish phase from late 2021 and continued that trend for 19 weeks after the budget, despite some strong rallies in between.
2023: The short-term downtrend continued for another 7 weeks after the budget.
2024: The market consolidated for 15 weeks before picking up the bullish trend again.
2025: Since September 2024, we’ve been in a downtrend, so based on the last four years observations, it seems likely this short-term downtrend could continue for a few more weeks.
🔘 Breaking the Budget week Low: If the market is already in a correction before the budget, there's a chance it could dip further if the budget week low is breached.
🔘 Breaking the Budget Week High: Just because the market breaks above the budget week high doesn’t necessarily means we are going for a big rally. It could also lead to consolidation or a continuation of a short-term downtrend until a higher high is established. In 2025, any bullish move below 24858 would not confirm a change in short term trend.
🔘 Long-Term Bullish Trend: In all of the past years, after the short-term effects of the news is over, the market has resumed its longer-term bullish trend.
Now this is up to a trader how he interprets these observations. A short-term trader might be looking for short term moves and short the rallies, whereas a long-term trader will focus on the long-term bullish trend and buy the pullbacks.
So, what’s your approach? Feel free to drop a comment below, and don’t forget to like or share if you want more educational content in the future.
