Decoding Market Volatility Before Budget

In 18 of the past 29 years, Sensex dipped on Budget day; 2021 was most volatile.

- RAJIV RANJAN SINGH

Union Budget is perhaps the most anticipated financial event in India, followed by everyone in the stock market from doyens of trading to wizards of fund management to the enthusiast with a fresh demat account. The reaction of the market has always put an informal stamp of approval, or otherwise, on Budget proposals.

Interestingly, in past 29 years, the market has seldom been euphoric before and after the Budget. Since 2013, the VIX (Volatility Index) has been above 20 in three months prior to the Budget, before inching closer to 15. This indicates there is huge volatility before the Budget that starts normalising afterwards.

The year 2021 was the most volatile since 2013, with VIX remaining in the 23 range for six months at a stretch, three months before and three months after the Budget.

So, do current times justify the hype around the Budget?