Indian Markets Drop as President Biden Opts Out of Race and Union Budget Looms
Indian markets started the week with a decline following global market weakness after U.S. President Joe Biden opted out of the presidential race. Indian markets are also facing selling pressure ahead of the Union Budget announcement by the government.
Market Performance
The Nifty 50 index declined by 100 points to 24,430, while the BSE Sensex lost 250 points to 80,391 during early trade on Monday. In the broader market on NSE, the volatility index surged more than 3 percent, and all the indices, including Nifty Next 50, Nifty 100, Nifty Midcap, and Nifty Smallcap, faced selling pressure, trading in red during early trade.
Expert Insights
Ajay Bagga, a Banking and Market Expert, said, “Indian markets will look at the Union Government’s Economic Survey, to be tabled in the Lok Sabha at 1 pm. Though the Economic Survey is more of a strategic document, with aspirational notes on what could be done, the data points on growth and the government’s assumptions on revenues and expenditure will be watched closely.”
On the impact of President Joe Biden opting out of the presidential race, Bagga added, “Markets had largely factored in a high probability of a Trump 2.0 Presidency and the Trump Trade was running. To that extent, markets should take this announcement in their stride and have a limited impact. The Democrat nominee finalisation around Kamala Harris and a VP-elect partner will be watched with interest. US futures are starting flat. We expect a limited impact on the markets for now.”
Global Market Trends
Elsewhere in the Asia-Pacific region, markets are predominantly trading lower. The Asia Dow shows a modest gain of 1.71 percent, contrasting with declines in Japan’s Nikkei 225 by 0.77 percent, Hong Kong’s Hang Seng index by 0.06 percent, and China’s Shanghai Composite by 0.26 percent. In European markets, the UK’s FTSE index declined along with the CAC index of France and the DAX index of Germany due to uncertainty in the U.S. elections. However, Dow Jones futures surged by 50 points to 40,336.42, while the S&P 500 and Nasdaq closed with a decline last week.
Historical Market Reactions to Budget
Interestingly, the market has historically reacted enthusiastically to the budget, as per BSE data. Between 2016 and the last interim budget announced in February, the market generally rose, except for the Union Budget of 2018, which saw a decline from 35,906.66 to 35,066.75, a drop of 839.91 points. The highest jump was observed the day after the Union Budget announcement in 2021, when the Sensex rose by 1,197.11 points, reaching 49,797.72 from the budget day figure of 48,600.61. Other significant increases were seen in 2017 with 777.35 points, 2018 with 84.97 points, the interim budget in February 2019 with 113.31 points, June 2019 with 792.82 points, 2020 with 136.78 points, 2021 with 1,197.11 points, 2022 with 695.76 points, 2023 with 224.16 points, and 2024 with 440.33 points a day after the budget announcements.
Foreign Investments
Meanwhile, foreign portfolio investors infused Rs 15,420 crore into the Indian equity market last week, according to data from the National Securities Depository. The net investment by foreign portfolio investors (FPI) surged to Rs 30,772 crore so far in July, indicating strong buying by foreign investors.
Doubts Revealed
Indian Markets -: Indian markets refer to the stock exchanges in India where people buy and sell shares of companies. The main ones are the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange).
President Biden -: Joe Biden is the President of the United States. He is an important leader whose decisions can affect economies around the world, including India.
Union Budget -: The Union Budget is a financial plan presented by the Indian government every year. It shows how the government plans to spend money and collect taxes.
Nifty 50 -: The Nifty 50 is an index of the top 50 companies listed on the National Stock Exchange (NSE) of India. It helps people understand how the stock market is performing.
BSE Sensex -: The BSE Sensex is an index of 30 well-established companies listed on the Bombay Stock Exchange (BSE). It is used to measure the overall performance of the stock market.
Ajay Bagga -: Ajay Bagga is a market expert who provides insights and analysis on financial markets. People listen to him to understand market trends.
Economic Survey -: The Economic Survey is a report by the Indian government that reviews the country’s economic performance over the past year. It helps in planning the Union Budget.
Foreign portfolio investors -: Foreign portfolio investors are people or companies from other countries who invest in Indian stocks and bonds. Their investments can influence the Indian market.
Rs 15,420 crore -: Rs 15,420 crore is a large amount of money, where ‘Rs’ stands for Indian Rupees. One crore is equal to 10 million, so this is a significant investment in the Indian market.
