Budget 2026: Will the stock market rally after this budget?

After a decline before the budget, the stock market has shown a strong recovery on most occasions. Pharma and Financial sectors have performed better after the budget.

Budget 2026 Share Market Impact: The domestic stock market typically experiences some pressure and uncertainty before the Union Budget each year. Investors remain cautious about policy announcements and tax-related decisions, leading to market fluctuations. In this context, after a recent decline before the budget, the market is now showing signs of recovery. According to an analysis by SBI Securities, the Indian stock market has registered a strong recovery in most instances after a pre-budget correction, and this trend appears to be repeating once again.

Market History During Budget Time (Pre-Budget Correction)

Looking at data from the last 15 budget cycles, the report clarifies that the Sensex and Nifty have often seen a decline of 3 per cent or more about a month before the budget. February 2014, February 2016, and February 2021 are examples when the market witnessed a pre-budget correction. However, on all these occasions, the market showed a positive trend after the budget was presented. According to the data, in the periods of one week, one month, and three months after the budget, the main indices have mostly delivered positive returns. This indicates that the pre-budget decline often becomes an opportunity for investors.

Post-Budget Strength

The report reveals that in the week following the budget, the Sensex closed with gains in 11 out of 15 instances. During this period, an average increase of about two per cent was recorded. The Sensex also provided positive returns in nine out of 15 instances over a three-month period. The performance of the Nifty has been similar, showing strength in 12 out of 15 instances. From a three-month perspective, the Nifty has given an average return of over 7 per cent. This clearly shows that stability and confidence return to the market after the budget, leading to renewed investor activity.

Trend in Pharma and Financial Sectors

At the sector level, Pharma and Financial Services stocks have consistently performed better after the budget. The Pharma sector closed with gains in the weeks following the budget in 14 out of 15 instances, while Financial Services stocks have also delivered strong returns. In contrast, the performance of the Auto and Realty sectors has been weaker compared to these. Furthermore, a decline in India VIX was recorded on the budget day and thereafter, indicating decreasing volatility in the market and growing investor confidence. Overall, history suggests that the possibility of market recovery remains after a pre-budget correction, and investors can strategise by keeping this trend in mind.