But the muted reaction on Budget Day reflects a deeper shift. Policymaking has become more continuous, predictable and front-loaded, leaving investors to position themselves weeks or months in advance rather than react to a single speech.
With key reforms, incentives and sector-specific measures now rolled out through cabinet decisions, press releases, special packages and the goods and services tax (GST) Council through the year, the element of surprise on Budget Day has largely faded, according to market experts. Market volatility around the event has declined, expectations are more measured, and investors are increasingly focused on medium-term policy direction rather than one-day announcements.
The finance ministry will present the FY27 Budget on 1 February 2026, at a time when it appears fairly placed to meet its 4.4% of GDP fiscal-deficit target, despite weak nominal GDP growth and sharp cuts in personal income tax and GST.
“The Budget is no longer the sole ‘Big Bang’ now,” said Dhiraj Relli, managing director and chief executive, HDFC Securities.
Front-loaded moves
A Mint analysis shows that over the past three years, Budget Day has failed to stir markets in any meaningful way. The Sensex rose a modest 0.4% on Budget Day in 2023, gained 0.61% in 2024, and was flat in 2025.
Longer-term data tell the same story. The Mint analysis of the Sensex’s behaviour around the Union budget announcements over the past 16 years shows that the market usually makes its biggest moves well before Budget Day, leaving the actual speech with limited impact.
In the run-up to the Union Budget, the Sensex has often seen sharp swings.
In 2021, the index rallied 22% in the three months leading up to the Budget, only to slip 2% in the final 15 days and remain largely muted on Budget Day, with a marginal 0.25% move. In 2022, the pattern repeated: the Sensex fell about 3% in the 15 days before the Budget, while the three-month return was a modest 0.2% and the Budget-day gain stood at just 1.2%, suggesting that expectations had already been priced in.
It is not just about returns, it is more about the magnitude of the market’s reaction, whether positive or negative, market participants said. Budget Day was once typically marked by sharp market swings rather than lacklustre moves. In 2020, the Sensex fell 2.4% on the Budget day. In contrast, it rose 1.7% in 2017, while in 2013, the index declined 1.5%.
The same dynamic was visible in subsequent years. In 2023, the Sensex delivered negative returns both in the three months before the Budget (-2.3%) and in the final 15 days (-1%), before edging up 0.4% on Budget Day. In 2024, the index rose 9.1% over the three-month run-up and 1.2% in the last 15 days, followed by a limited 0.6% gain on the day of the announcement.
By 2025, this front-loading of market moves became even clearer. The Sensex fell 2.8% in the three months preceding the Budget, then rose 1.3% in the final 15 days. The reaction on Budget Day itself was largely flat, underscoring how policy expectations are increasingly absorbed well before the speech.
Simply put, instead of reacting sharply on the day of the Budget, investors tend to position themselves in advance. As a result, the period leading up to the Budget has become far more important for market direction than the announcement itself.
Since 2010, the three months before the Union Budget have consistently been marked by elevated volatility in the Sensex. In nearly half of these years, eight in total, the benchmark index has declined during this pre-Budget phase, reflecting rising uncertainty as investors attempt to price in policy signals and fiscal priorities ahead of time.
This front-loaded behaviour is visible even over shorter timeframes. In the 15 days leading up to the Budget, the Sensex has fallen in eight of the past 16 years, including 2014, 2016, 2020, 2021, 2022 and 2024, suggesting that caution often builds just ahead of the event.
If you are a long-term investor, Budget Day has historically been a poor day to “time” the market, Relli said.
This fading ‘surprise factor’ of the Union budget, according to Relli, signals that India has moved from event-based governance to ‘process-led’ policy. Lower volatility is a sign of a maturing market where the roadmap is clear, the reforms are continuous, and the ‘noise’ of a single day is finally being replaced by the ‘signal’ of long-term growth, he believes.
So far in the roughly two months ahead of the FY27 Budget, the Sensex has fallen over 4%, suggesting that markets have already adjusted and priced in many Budget expectations even before the speech, in line with historical pre-Budget trends.
Budget still matters
That said, market participants noted that the Budget still influences which sectors lead for the year. For example, 2025 focus on consumption led to a rally in fast-moving consumer goods (FMCG) and automobile stocks, while the defence sector saw profit-booking, some said.
The consensus is that the Budget will ramp up capex on infrastructure, defence and railways to buffer the economy, with a higher defence outlay. Industry bodies are seeking support for MSMEs, manufacturing, green energy, artificial intelligence (AI) and exports, while Budget Day volatility is expected to stay high if stimulus falls short or fiscal discipline slips, risking higher bond yields and tighter liquidity, said some market experts.
While a pickup in development spending and capex is positive for markets, it may not be enough to arrest earnings downgrades, as margins are set to normalise and external risks remain elevated, highlighted a January report by Nuvama Institutional Equities. “Hence, unless there is a larger growth impulse, defensive bias is warranted,” the report said, adding, “Tweaks on capital gains taxes could sway sentiments in the near term”.
Kotak Institutional Equities said in its 16 January report that while equities could be disappointed by the lack of big-ticket measures or spending, the bond market may also turn cautious over a likely rise in market borrowings.
“India’s current economic backdrop, shaped by geopolitical tensions and trade uncertainty, warrants a steady, growth-supportive stance in the FY2027 Union Budget.”
The brokerage has pegged FY27 GDP growth at 4.3%, factoring in a slower pace of fiscal consolidation, sustained capex, especially in defence and loans to states, and modest tax buoyancy aided by a large RBI surplus. It added that borrowing is likely to stay high, with heavy redemptions putting upward pressure on the yield curve.
BofA Securities said in a 14 January report, “The Ministry of Finance is on track to hit its medium-term fiscal target of below 4.5% of GDP it had set in 2021 for the fiscal deficit and is going to pivot to a debt sustainability framework from FY27, targeting 55% of central debt to GDP, down from an estimated 56.1% of debt in FY26″.
According to Madhavi Arora, chief economist at Emkay Global Financial Services, the Budget will be closely tracked for signals on the trajectory of bond yields, the government’s approach to fiscal consolidation, and both the pace and quality of capital expenditure and allocations. Equally important will be the steps taken to ease the tax regime for foreign investors and improve India’s investment appeal.
