Why stock markets often trade lower ahead of Union Budgets

New Delhi, Jan 25: As the government prepares to present the Union Budget 2026-27, data from 2010-2022 shows that markets often trade lower ahead of the event due to fear of policy surprises, though post-budget rebounds are common — with an average 1.36 per cent gain in the following week, according to market watchers.

This pre-budget weakness is attributed to elevated volatility, as seen in the average 2.65 per cent intraday trading range on budget day itself, they said.

Over the past 15 years, the average return for Nifty one week before the budget has been negative at -0.52 per cent, with the index closing higher only on 8 occasions.

This pattern aligns with broader trends, where Nifty posted negative returns in the month preceding the budget in four out of the last five years, including a drop in January 2025.

“For the Union Budget 2026, expectations centre on balancing fiscal prudence with growth stimulus amid global headwinds like US tariffs under President Donald Trump,” said Rahul Sharma, Director, Head - Technical and Derivative Research, JM Financial Services Ltd.