Union Budget 2026: As India heads into the Union Budget for FY26–27, investors are once again bracing for heightened volatility, with historical trends suggesting that caution tends to dominate market sentiment in the days leading up to the key policy event. The Union Budget has long been a major market-moving trigger, shaping sectoral leadership and influencing short- to medium-term trends based on fiscal priorities and policy direction.
The upcoming Budget is expected to focus on capital expenditure, manufacturing-led growth and macroeconomic stability, even as the government navigates global uncertainties. Traditionally, Budget announcements have had an outsized influence on Indian equities, with sharp sector-specific moves often following policy cues and allocation decisions.
Budget-week performance
According to Rahul Sharma, Director and Head of Technical & Derivative Research at JM Financial Services, the pre-Budget phase has historically been a period of restraint rather than optimism. He noted that the Nifty 50 index has shown consistent caution in the week ahead of the Budget, driven by uncertainty and profit-booking.
“The Nifty 50 index has historically exhibited caution in the week leading up to India’s Union Budget announcements, reflecting investor uncertainty and profit-booking. Over the past 15 years, the average return for Nifty one week before the budget has been negative at -0.52%, with the index closing higher only on 8 occasions,” Sharma said.
He added that this trend mirrors broader market behaviour, with Nifty delivering negative returns in the month preceding the Budget in four of the last five years, including January 2025. Data from 2010 to 2022, Sharma pointed out, shows that markets often drift lower ahead of the event due to fears of policy surprises, even though post-Budget rebounds are common. Historically, the week following the Budget has seen an average gain of 1.36%, while Budget day itself has been marked by sharp swings, reflected in an average intraday range of 2.65%.
Technical View
Ravi Singh, Chief Research Officer from Master Capital Services believes, for the upcoming week, the weekly chart and candlestick pattern suggest further downside in the near term. “Immediate support is placed near 24850, and a break below this level could drag the index toward 24600. On the upside, resistance is seen at 25250, while sustained strength above this could lead to a recovery toward 25500. Until then, a sell-on-rise strategy remains preferable,” he predicted.
What investors expect — and where the risks lie
For the Union Budget 2026, scheduled to be presented on February 1 by Finance Minister Nirmala Sitharaman, expectations revolve around balancing fiscal discipline with growth support amid global headwinds, including trade-related pressures under US President Donald Trump. Anticipations include higher capital expenditure on infrastructure, defence and railways, along with a potential increase in defence allocation to cushion the economy against external shocks.
Industry bodies have sought targeted measures for MSMEs, manufacturing, green energy, artificial intelligence and exports, including faster GST refunds and higher investments in logistics. The fiscal deficit is projected at 4.4% of GDP, with continued emphasis on job creation, rural demand and sustainable growth as India moves toward its $5 trillion economy ambition.
However, risks remain. Budget-day volatility could intensify if growth stimulus disappoints or fiscal targets slip, potentially pushing bond yields higher and tightening liquidity. External factors such as geopolitical tensions, currency volatility and global trade disruptions also pose challenges, while domestic policy execution delays could weigh on sentiment. Concerns around valuations, foreign institutional investor outflows and the risk of an AI-led market correction add to the list of headwinds that could slow Nifty’s broader trajectory.
Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, said the data clearly highlights a familiar behavioural pattern around the Budget.
“Markets tend to turn cautious ahead of the event. On average, backward returns are marginally negative, indicating profit-booking and risk reduction as uncertainty peaks. The post-Budget phase is where conviction returns, as forward returns improve meaningfully once policy clarity emerges,” Sheth said.
Sheth added that historically, patience has mattered more than prediction, with investors benefiting from waiting for clarity rather than reacting to Budget-day headlines.
As February 1 approaches, history suggests that while nerves may dominate the lead-up, the real opportunity for Nifty often emerges only after the Budget dust settles.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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