Bulls & the Budget: Will markets end losing streak?

The Sensex has declined 7 per cent in the last five trading sessions before the budget, in line with the rest of Asia, as foreign institutional investors booked profits from some emerging markets. Will the trend reverse after the budget? Unlikely, according to analysts. In nine out of the past 15 years, the Sensex gave positive returns in the first five days after budget. It fell nearly 4 per cent in five sessions in the run-up to budget 2020. That underperformance got reversed within a week, with the benchmark rallying 3.5 per cent over the next five sessions. However, in the last three years, the Sensex has performed poorly in the month after the budget. In 2018, it declined 6 per cent in the month while the loss in the benchmark index in 2019 over a similar period was 7 per cent. Last year, the Sensex fell 4 per cent in the month after the budget. This year too, the Sensex is likely to take a breather after a sharp rally in the past three months amid reallocation of funds by overseas investors–from commodity-importing countries to exporting countries, according to analysts. “If the world economy revives, the commodity cycle revival will follow through and when the commodity cycle revives, it is not good for India as we are a commodity importing country whether for Brazil, Russia and South Africa–most of the other emerging markets which compete for capital–are commodity exporters,” said Sunil Subramaniam, CEO, Sundaram Mutual Fund. “Now a little bit of reallocation of capital between a commodity user like India and a commodity exporter like other emerging countries is also playing out.”


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