Monday, February 1, 2010

Before the Budget

TA members living outside Delhi should be assured that we will record the event and provide a webinar. If you live near Delhi, you should attend. ( for details).

A new calendar month starts today, with the presentation of the Union Budget to be the main event. There is a general feeling that the run up to the budget provides a rally of some kind. But do the numbers support this claim? I coded a quick scan to find out what happens between the last day of January and the date before the15th of Feb. Here are the results:

Year   Change in Nifty points

95          -38.59

96           203.57
97          36.80
98          11.10
99            4.05
2000     198.30
2001     21.65
2002     74.60
2003     -5.85
2004      103.85
2005      40.65
2006      16.45
2007      -35.60
2008      64.55
2009      73.55

The study covers 15 years. Out of 15, we had 3 negative changes and 12 positive changes. This is raw data, since there were a few years in which the Union Budget was not presented in Feb.
Readers are invited to provide additional insights into these numbers.


Prashant said...

An analysis of these numbers shows that there was no significant positive change except in 1996 and 2000. I don't think we need to attach too much importance to the event. To me, the whole concept of a pre-budget rally seems rather illogical. Especially at a time when we have relief package in place for the industry, we need not be unduly optimistic. Add to this the fact that we have already seen a run up of about 100%. Volatility is, however, a certainty in the days to come.

Viral Rajnikant Dholakia said...

Dear Mr Sukhani,

Your home work is up to the mark. But, there is one odd number that could work-out before the 15th of this February.

In most of the 15 years of which you have provided the record, none experienced a slowdown as sharp as we witnessed in last 1 yrs. None of the years recorded the stimulus as was provided gy GOI in last 2 yrs. None of the last 15 yrs saw a dramatic slump & recovery both as has been witnessed in last couple of years.

Coming to my point more directly, in most of the preceding years, the expectation from the Union Budget was on positive side. But this time around markets may slowly try to discount the negative outcome from budget as expected to be announced from FM in lieu of India's rising deficit. Markets may slowly discount the negative effects of a gradual withdrawal of varuois stimulus measures provided to different industries.

The sharp recovery in last 6 months may prompt FM to 'undo' some of the goodies of last 2 yrs of stimulus measures.

This raises the probability of Negative returns in this year just prior to Budget.

Just an Expectation going to the event!! Thank You.

PrashantShah said...

dear Sir,
I thought nifty %change to above numbers may make picture more clear:
Change %Change
1995 -38.6 -3.60%
1996 203.57 23.99%
1997 36.8 3.78%
1998 11.1 1.15%
1999 4.05 0.42%
2000 198.3 12.82%
2001 21.65 1.58%
2002 74.6 6.94%
2003 -5.85 -0.56%
2004 103.85 5.74%
2005 40.65 1.98%
2006 16.45 0.55%
2007 -35.6 -0.87%
2008 64.55 1.26%
2009 73.55 2.56%

3 negative out of 15(1 below 3%).Rest positive (5 above 3% and 2 of them above 10%).


NRG said...

Great to hear about the webinar Mr.Sudarshan, and thanks for the data on the budget moves too.
Consensus on a budget rally is a little misplaced this time we think because as the RBI has said that monetary tightening will follow on... and the budget is expected to bring no sops and as a matter of fact it is expected to bring in reversals of sops already provided. The last budget rally saw a nasty cut as expectations failed... so will it be the same thing this time again? Maybe we'll just stay in a range of 5200 - 4800 until then and react according to the disappointment.
A rally is not what this might be... just a technical pause/pullback from where we move back down again. Major trigger events are so unpredictable... the one that just went by i.e. the RBI monetary policy, we saw a more than expected CRR hike and since then we've be drifting up slowly!!! The market's got a mind of it's own.

On a stock check note Mr.Sudarshan, are there any inter-mediatory up-moves in SBI (from 2015 to 2175), GAIL (from 408 to 440), Andhra Bank (from 103 to 111) and Unitech (from 76 to 85)?
Could you please provide your inputs on them.

Neha & Ravi.

PPTrader said...

Out of the three negatives '03 was start of bull run and '07 was the last year of it.....Any correlations?