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Benchmark equity indices BSE Sensex and NSE Nifty are likely to stay volatile on the budget day on February 1. Going with market analysts, the risk is that expectations are high that the government will have to find a balance between populism, reform and growth under a weak fiscal position.

Ahead of the budget, the 30-share index has already retreated 3,506 points, or 7.04%, to 46,285.77 during the past six trading sessions till January 30. Historical data of the past 10 years showed the stock market closed lower on six occasions the budget day.

Last year, the 30-share Sensex tanked 2.43%, or 987.96 points, to close at 39,735.53. Likewise, the 50-share Nifty index slipped 2.66%, or 318.30 points, to 11,643.80. That was the worst budget day fall for both the indices since 2019.

The BSE Sensex had also witnessed a fall of over 1% on the budget day 2012 and 2013. It also declined marginally 0.28%, 0.66% and 0.16% on the eventful day in 2014, 2016 and 2018.

Nitin Aggarwal, CEO, Religare Broking said, “While there are a lot of expectations that FY22 Union Budget will take a number of measures to ensure that the post-Covid rebound in Indian economy is robust and sustainable, there are also hopes for market-focused announcements that will cheer the sentiment on the Street.”

Among the key expectations, the investors will look forward to the abolition of long term capital gains tax or redefining the long term to two years and reducing the taxation to nil, while further allow indexation benefits to equity mutual funds and some relief on dividend distribution tax in hands of investors.

On the other hand, the key index had gained 0.69%, 0.48%, 1.75% and 0.58% on the budget day in 2011, 2015, 2017 and 2019, respectively.

Gaurav Dua, SVP, head capital market strategy & investments, Sharekhan by BNP Paribas said, “Given the backdrop of pandemic led economic disruptions and the fiscal slippage in fiscal 2020-21, the government’s focus would be to boost demand and support the economic recovery. But also the finance minister would have to find innovative ways of raising resources to curtail the bourgeoning fiscal deficit despite the need for an elevated level of expenditure in the next fiscal. We expect infrastructure development, healthcare and job creation to be high on the priority list in the forthcoming budget. Overall, the expectations are running high which is never good news before an important event.”

Rajesh Agarwal, Head Research, AUM Capital said, “There might be some amount of volatility on the budget day and the day following, but I think after that things would be normal.”