Impact of Union Budget 2019 on Stock Market

By Advisorymandi
10-January-2019 12:14:46 PM

The Union Budget 2019 date is out. An interim budget will be tabled by the Union Finance Minister Arun Jaitley in the Parliament on February 1, 2019, ahead of the Lok Sabha Elections 2019, which are due in the month of May. It is perhaps one of the most important events in the history of the stock market in India and the economy. How will the stock market react to the Union Budget 2019? This is a question that crops up into the minds of every trader and investor in the market. They are not only interested in the increase or decrease in the share prices but also quite curious to know about the certain economic events that generally take place during the budget.


Important Point to Note: A very important point to remember here is that in February only the interim budget 2019 will be unveiled by the finance minister. It will not be a full-fledged budget as it only portrays the government’s expenditure plan for the year. It will be the last budget session before general elections 2019 that are due in April-May. The interim budget is tabled in the Parliament few days or months before the general elections. A full Union Budget 2019 will be presented by the new government.


2019 Union Budget Impact on the Stock Market

Traders and investors are actively curious during the time of the union budget to determine its impact on the stock market or share prices. Every major share tends to show some volatility before and after the presentation of the budget. If we take the historical benchmarks into the consideration, then it can be quite easily analyzed that from the year 2010, the stock market has risen 6 out of 10 times, after the budget. The different ways in which the union budget impacts Indian market are as follows:


Scenario 1: If there is an increase in interest rates

There is no doubt at all that the budget impacts the economy, which can be both positive and negative. How the union finance spends or invests the money eventually impacts the fiscal deficit of the country. The extent of the deficit can very much influence the interest rates. If the rates are on the higher side, then it means lower profits for the company and decline in the stock prices.


Scenario 2: If there is an increase in the direct taxes

If there is an increase in the direct taxes, then it means that the disposable income will decrease. In such a situation the demand for the goods will be on the lower side. If there is a decrease in the demand for the goods, then it is quite obvious that the production of goods will suffer, therefore impacting the profits and share prices of the company.


Scenario 3: If there is an increase in the indirect taxes

In the same lines, if there is an increase in the indirect taxes, then it will also lead to a decrease in the demand for the goods. The prominent reason behind this is that most of the companies generally pass the indirect taxes partially or completely on to the customers by increasing the prices of the products. If the prices of the goods are increased, then the demand for the same will eventually be lower than would impact the profit margins of the companies and share prices will also come down.


Union Budget 2019 Trading Strategy

Most of the investors, mainly the beginners are quite confused about whether it is profitable to trade during Union Budget or not? Well, it is quite a difficult task to provide an accurate answer to this question. There is no prohibition of trading during the day of the union budget. However, it is to be kept in mind that before and after the presentation of the budget, the market remains highly volatile. In such a situation, the investors, mostly the first-timers must not panic and be patient. This is because many shares may either fall or rise considerably based on any budget announcement. They must first get an excellent view of the budget, carry out stock analysis, analyze the market situation and then take the investing or trading decision.


Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.

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Author: Advisorymandi

AdvisoryMandi is India's most trusted Stock Market Advisory marketplace covers NSE, BSE, MCX & NCDEX. Invest with confidence and harness the power of AdvisoryMandi to make smarter investment decisions in Stocks, Indices, Commodities, Forex & IPO.

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10 months 7 days ago

Thank you for the valuable information I also found some information related to your article in knowledge-center.