Budget 2022: Sensex, Nifty likely to remain volatile ahead of Budget

New Delhi: As the countdown to the Union Budget 2022-23 has begun, the week starting Monday is likely to witness volatility in the Indian stock market. Market participants will try to envisage the reforms and measures likely to be announced by Finance Minister Nirmala Sitharaman in the Budget to be presented on February 1, and take speculative business decisions. Indian stock markets have historically been volatile with a negative bias in the fortnight before the presentation of the Union Budget.

The bears were in full control on Dalal Street during the week ending January 21. Benchmark indices – Sensex and Nifty – fell nearly three and a half per cent during the week after four weeks of victories. Major indices suffered heavy losses in four of the five trading sessions of the week.

The benchmark Sensex fell 2,185.85 points and Nifty 638.6 points or 3.5 per cent during the week ended January 21. Indian stock markets witnessed heavy selling during the week amid negative cues from global markets amid speculation of a policy hike by the US Federal Reserve. Rates faster than expected.

Major indices across the world saw a sharp decline during the week. The Nasdaq Composite Index declined 7.6 percent during the week. The S&P 500 lost 5.7 percent.

Bond yields rose on speculation of a rate hike. US as well as Indian bond yields hit a two-year high. India’s 10-year government bond yield rose to 6.68 per cent and the US 10-year Treasury yield rose to 1.90 per cent. Foreign institutional investors sold heavily during the week. Investors are withdrawing money from equities and investing in debt.

A sharp rise in crude oil prices, rising concerns over inflation and restrictions imposed across the country to contain the spread of the new variant of COVID-19 have also shaken investor sentiments in the markets. Crude oil prices rose to $89 a barrel, the highest level in seven years.

The Union Budget 2022-23 will be presented before the assembly elections in five states. The Uttar Pradesh assembly elections are being considered very important. There are speculations that the government will bring a populist budget to win the hearts of the voters. Apart from the speculative business ahead of the Budget, there are several other developments which are likely to cause volatility in the market in the coming days.

The US Federal Reserve is scheduled to meet on Tuesday and Wednesday. The Fed’s action will have a huge impact on global markets. While the Fed has already signaled a policy rate hike, investors await clues from this week’s meeting as to how much of a rate hike will be expected and when it will start.

Big earnings news is also expected during the week. India’s most valuable company Reliance Industries Limited (RIL) on Friday announced its third quarter results. The report was made public after the stock market closed on Friday. The company reported a whopping 38 per cent jump in its third quarter net profit. It will be interesting to see how the market reacts to RIL’s Q3 numbers. Read also: Rakesh Jhunjhunwala Portfolio: Brokerage house predicts up to 29% fall in this stock, know why

ICICI Bank on Saturday announced its third quarter results. The private sector lender’s net profit rose 25 per cent to Rs 6,194 crore during the quarter ended December 31, 2021. In stocks like Reliance Industries and ICICI Bank, the direction will have a big impact on the market on Monday. Read also: What is the iPhone 13 pink screen issue? All you need to know

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