Stocks in India Face Budget Hurdle With History as Guide
A man looks at a screen displaying the Sensex on the facade of the Bombay Stock Exchange (BSE) building in Mumbai. (Photo: Bloomberg)

Stocks in India Face Budget Hurdle With History as Guide

If history is a guide, the recent rough ride for Indian stocks will likely continue after Monday’s budget.

The benchmark S&P BSE Sensex has climbed in the month following the budget day in only two of the past seven years since Prime Minister Narendra Modi came to power, while falling or staying rangebound on other occasions. Risks are compounded in 2021 given stretched valuations.

Stocks in India Face Budget Hurdle With History as Guide

“There are expectations that the government will keep aside fiscal prudence and open its pockets to spend more,” said Ajit Mishra, vice president of research at Mumbai-based Religare Broking Ltd. “Investors and businesses are pinning high hopes on the budget and any disappointment could lead to profit-taking.”

The Sensex began 2021 on a strong footing after a blistering 25% advance last quarter -- thanks to record inflows from foreign investors -- even as data showed that India’s economy had plunged into recession. But there are signs the rally is petering out: the index slid 5.3% last week, the most since early May.

Stocks in India Face Budget Hurdle With History as Guide

SGX Nifty 50 Index futures for February delivery were little changed as of 9:45 a.m. in Singapore on Monday, even as a broader gauge of Asian stocks climbed 0.8%.

“Valuations are correcting from all time high levels for most sectors,” said Dhiraj Relli, chief executive officer of Mumbai-based HDFC Securities Ltd. “We don’t expect significant upside.”

©2021 Bloomberg L.P.

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