Making Sense(x) of the budget

It's that time of the year again. The budget for the year is soon to be announced, and from salaried employees to the local storekeeper, everyone has their pen and paper out.

But what about the markets?

Given that the budget gives out the blueprint for the money supply, logic dictates it will have some impact on the market.

To find out, we did some digging and looked at Sensex returns before and after the budget days of the last 15 years. We took seven trading days before the budget days for pre-budget returns, and for the post-budget figures, we took seven trading days after the budget announcement, including the budget day.

As expected, we spotted some Sensex movement around the budget day. For example, it fell 8.3 per cent in 2008 and gained 7.0 per cent in 2016 in seven days post budget announcement.

However, there is no underlying trend. And considering the plethora of factors that impact market volatility, it is hard to single out budget announcements as the primary cause.