How the Budget affects the Sensex

It's back to square one for the Indian markets. After the bloodbath they witnessed in January this year, the scenario changed for the better for the first two trading days in February when the markets recovered from the huge fall. However, the markets have once again turned bearish following a steep fall in global stock markets.

In January, the Sensex and Nifty crashed as investors panicked following weak global cues amid fears of the US recession. The index shed 1408 points (7.1 per cent) to close at 17,605.40 on January 21, the biggest-ever loss in absolute terms and also the first-ever four-digit loss for the index at close.

With the Budget around the corner, how will the days ahead be? Last year, the Sensex saw the biggest fall on Budget day in five years. How will the markets behave this year?

Will the Budget have a positive effect on the Sensex?

Sensex in Feb 2007

On Feb 28, 2007 the Budget failed to cheer investors on a choppy day. The Sensex shed 541 points to wind up the day at 12,938. It was the biggest fall since the May 18, 2006, and it was the lowest close since December 12, 2006.

The announcement of indirect tax and increase in excise duty on cement prices followed by the extension of minimum alternate tax (MAT) for the IT sector dampened market sentiment.