Investors await Finance Minister Sitharaman's 7th Union Budget amid market volatility

CHENNAI: As the highly-anticipated Union Budget week commences on Monday, investors' sentiments in the equity market will be driven by the announcements made by Finance Minister Nirmala Sitharaman. Finance Minister Sitharaman will present her seventh consecutive Union Budget on July 23.

Last week, the Indian stock markets closed nearly unchanged after a period of strong gains, buoyed by positive global cues and a promising start to the earnings season. However, profit-taking on Friday erased earlier advances, leaving the Nifty index at 24,530.90 after reaching a high of 24,854.80. In the past week, sectoral stocks in FMCG and IT sectors maintained their upward momentum, while sectors like metal, energy, and media saw declines. Broader indices also slipped, experiencing losses between 2.2 percent and 2.9 percent. Interestingly, the market has historically reacted enthusiastically to the budget, as per BSE data. Between 2016 and the last interim budget announced in February, the market generally rose, except for the Union Budget of 2018, which saw a decline from 35,906.66 to 35,066.75, a drop of 8839.91 points. The highest jump was observed the day after the Union Budget announcement in 2021, when the Sensex rose by 1197.11 points, reaching 49,797.72 from the budget day figure of 48,600.61. Other significant increases were seen in 2017 with 777.35 points, 2018 with 84.97 points, the interim budget in February 2019 with 113.31 points, June 2019 with 792.82 points, 2020 with 136.78 points, 2021 with 1197.11 points, 2022 with 695.76 points, 2023 with 224.16 points, and 2024 with 440.33 points a day after the budget announcements. Meanwhile, foreign portfolio investors infused Rs 15,420 crore into the Indian equity market, according to data from the National Securities Depository. The net investment by foreign portfolio investors (FPI) surged to Rs 30,772 crore so far in July, indicating strong buying by foreign investors. Market experts suggest that foreign investors are investing in Indian markets amid a weakening dollar and bond yields. If this trend continues, foreign investment will likely persist. In the coming week, investors' sentiments will also be influenced by the April-June quarter results for fiscal 2024-25, foreign fund inflow, crude oil prices, global cues, and other data. "Looking ahead, the upcoming week holds significant importance for both equity markets and the overall economy. The Finance Minister will present the government's first budget on Tuesday, July 23, expected to largely follow the interim budget. Globally, US markets are also undergoing profit-taking after a strong surge, influencing market sentiments," said Ajit Mishra, SVP, Research, Religare Broking Ltd. "Market reactions will hinge on earnings reports from major players like Reliance Industries and HDFC Bank early in the week, before shifting focus to the Union Budget. Increased volatility is anticipated in subsequent sessions," he added.