Stock Market Reactions to Union Budget Announcements: An Econometric Assessment
Purpose: This study investigates the impact of Union Budget announcements on Indian stock market performance from 2000 to 2024. Design/methodology/approach: Employing event study methodology, GARCH modeling, and panel data analysis, we examine how budget announcements influence market indices and sectoral performance on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Findings: Our findings reveal significant abnormal returns around budget presentations, with notable sectoral heterogeneity in response patterns. Tax policy changes and fiscal expenditure announcements emerge as key drivers of market reactions. Practical implications: The paper provides nuanced insights into the evolving relationship between fiscal policy announcements and Indian equity markets, with important implications for investors, policymakers, and market regulators. Originality/value: We document an increasing market efficiency over time, with pre-budget speculation effects diminishing and post-budget adjustments occurring more rapidly in recent years.