Is there a link between how markets react to Budget in the short term and how bourses fair by the end of the year? Going by data available since 2008, excluding interim Budgets, there seems to be a correlation. For example in 2008, when the markets had turned red in the first week after the Budget, the key indices were in the negative at the end of the year (partly because of the financial crisis, which broke out in the year 2008). In 2010, the market had turned positive post the Budget and remained in the green by the year-end.

According to market analysts, the Budget influences market behaviour as foreign institutional investors look out for policy directions. “The market behaviour also depends on the inflows from foreign institutional investors as they wait till the outcome of the budget and its announcements,” said G Chokkalingam, Founder, Equinomics Advisory and Research.

There are of course exceptions. In 2009, 2011 and 2012, the markets behaved differently post Budget to how the year ended. In 2009, for example, the markets had dipped 4.6 per cent post the Budget but the year ended positively up by 75. 8 per cent. This happened because of the outcome of general elections when UPA came back to power.

Big gains before Budget The market was also coming out of a steep decline of 52 per cent in the year 2008 due to financial crisis.

This year, Nifty 50 gained 6.6 per cent one month before the Budget and has risen further by 1 per cent post the big event of the year (as on February 6). 2017 has been the first year wherein market has gained so much in the run-up to the budget and has continued the positive trajectory. While the Budget cheered investors mainly due to zero tinkering with market-related taxes, thrust on promoting the rural economy and infrastructure has also been welcomed by experts.

Pankaj Pandya, head of research at ICICI Direct has kept Sensex/Nifty target of 30,200/9,150 for 2017. This implies a further upside of 6 per cent and 4 per cent, respectively.

Geojit Research also has 30,200 target for Sensex but till March 2018. Both have estimated a target price to earnings multiple of 16 and 16.5 times respectively for FY18 earnings.

A caution But UR Bhat, managing director at Dalton Capital Advisors (India) Pvt Ltd advised caution saying that the past trend may not always indicate how the markets will play out in the future . “Certainly Budget gives direction but there are many other issues which affect market performance for the year,” he said.

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