Budget Window: Short-Term Market Struggles, Long-Term Gains

• Markets typically struggle in the one-month period around the Union Budget announcement, with negative returns observed in 10 out of 14 pre-Budget months and 7 post-Budget months since 2014.
• Despite short-term volatility, markets show strong long-term gains, with positive returns consistently seen over three and six-month periods both before and after the Budget.
• The Union Budget's influence has narrowed to direct taxes and specific policy choices due to GST and other proactive initiatives, but it remains crucial for fiscal deficit, infrastructure, and capital expenditure.
• Market reactions on Budget day are often impulsive, and post-Budget movements can be inverse to pre-Budget trends unless there are significant deviations from expectations.
• Anticipation for Budget 2026 focuses on cash market participation and potential relaxation of capital gains taxes, following unfavorable changes in Budget 2025.

Why It Matters: Markets face short-term challenges around the Budget but consistently deliver robust long-term returns.