Budget 2024: Deciding investments based on expectations? Don't — This study cautions long-term investors. Here's why

Union Budget 2024: The study, tracking market performance ahead and after Union Budget announcements since 2000, found the event had no lasting effect on stock performances, and was hence, not the most impactful indicator to track when choosing investments.

Union Budget 2024: The top 500 companies in India have provided investors with a median return of -0.1 per cent across 24 Budget days since 2000, a study by Capitalmind Financial Services found. In a release, the SEBI registered portfolio manager said that Union Budgets are a “poor prediction of annual returns”, adding that long-term investors should avoid making market decisions based on expectations or announcements made in the Union Budget. The study, in effect, found that Budget announcements had little to no effect on stock performances and were hence not the most impactful indicator to track when choosing investments. ‘Long Term Driven by Fundamentals, not Budget’ “What our study implies is that while there tends to be significant volatility leading up to and immediately after the budget based on expectations, the longer term is driven by the underlying fundamentals of corporate earnings growth,” Anoop Vijaykumar, Investments & Head of Research, Capitalmind, said in the release. He added that long-term investors “should avoid making significant equity allocation decisions based on expectations or announcements made in the budget. Instead, they’d be better served by staying the course with their investment plans, keeping their financial goals in mind.” Examples of Markets Reactions to Budget Announcements The Capitalmind study cited four unintuitive examples to explain how the markets reacted to Budget announcements over the years. It noted that markets remained unpredictable on Budget day and that annual performance could also not be deduced based on Budget impact. Other Key Observations