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The Union budget is the biggest and most awaited event in the Indian financial calendar.

This year, the expectations of a ‘once-in-a-100 years’ kind of a budget are further fuelling hopes of a sharp rebound in the pandemic-hit economy.

Investors too await this event as it acts as a big trigger for stock markets and the direction it follows post the announcements.

However, there is nervousness about a feared fall this time, as some believe the euphoria seems largely priced in.

So, how should investors play the budget theme this year?

A look at the historical performance of equity benchmark indices in the run-up to the budget and on the budget day itself over the last 10 years might hold some cues.

On budget day in last 10 years, the equity benchmarks have ended lower on four occasions, have risen by 1% on four occasions and ended flat twice.

The best return for markets on a budget day in last 10 years was in 2017, when it jumped 2%. The worst budget for the market was in 2013 over the last 10 years.

On the other hand, as per the historical data, a one month post-budget return in Nifty has ranged between 3-9% on five occasions while it has given flat to 5% positive return in other five years.

Back in January 2020, both Sensex and Nifty had touched fresh highs ahead of Budget, and then the market came crashing down.

There’s lingering fear if history will repeat itself especially after current bull run.

The benchmarks have already given 15% returns in 2020 and the rally is continuing in 2021.

In January, the S&P BSE Sensex is up about 3% till date.

The high valuations ahead of the Budget 2021 should make everyone cautious about the strength of the rally.

Money9 spoke to market experts to find out how they expect the markets to react post the budget.

Most analysts believe the budget could usher in hopes of further recovery in the economy. Indications of the same have also emanated from the finance ministry.

Experts also believe the focus will be on growth and fiscal considerations will be kept on the back burner.  However,

any disappointment on February 1 could lead to a knee-jerk reaction and the Nifty could re-test crucial support levels.

Rajesh Agarwal, Head of Research, AUM Capital told Money9 that on most occasions in the past, profit-booking has taken place post the budget speech and that may be the case this time too.

He also added by saying, “If the government opts for a super-rich tax , it can trigger a sell-off. However, the undertone is positive and every dip can be looked upon as a buying opportunity and adding quality stocks to the portfolio.”

Agarwal believes 14,000 could be the support to keep in mind after the recent run up on the Nifty.

He suggests investors to stay put in quality names and not worry about knee jerk reactions if any.