Nifty set to break 23-year-old record. It's not good one
What's the story
The National Stock Exchange's Nifty index is all set to end January with its fourth consecutive month of decline, a rare event not witnessed in the last 23 years.
The trend marks an unusual period of correction for the stock market.
So far this month, Nifty has lost around 3% of its value and looks poised to close January on a negative note.
Despite today's rally, Nifty and Sensex remain down 12% from their record highs of September 2024.
Market history
Historical context of Nifty's 4-month losing streak
Rupak De from LKP Securities emphasized that the last time we saw a four-month losing streak was in 2001.
Back then, Nifty declined an average 6% in four months from July to September, and then rose 5% in the next three months.
Anand James of Geojit Financial Services, observed that "since 2000, Nifty has seen 13 instances of three months of consecutive downsides and around 70% of the time, we saw an average 3% upside in the next three months."
Future predictions
Market outlook for February amid budget announcements
The market outlook for February will largely depend on budget announcements, RBI policy, Trump's trade policies, FII flows and if Q3 earnings can support valuations.
However, going by history, February has also been a negative month for the stock market.
In the last decade, the index has closed in red on six occasions with an average return and a median return of -1.2% each.
Budget impact
Analysts predict market bounce back post-budget
Analysts have noted that the market remains under pressure a week before the budget but rebounds once the uncertainty is out.
SAMCO Securities said, "The average return of Nifty one week before the budget is -0.46% while one week after is 1.35%."
They added if Nifty falls more than a percent a week before the budget, it has always rebounded with positive returns after the budget.
Budget expectations
Market expectations from the upcoming budget
Morgan Stanley analysts say the market expects the budget to cut direct taxes to boost consumption and increase infrastructure spending.
They advised keeping an eye on announcements affecting sectors like agriculture, housing, railways, defense, electronics, textiles, auto ancillaries, food processing and renewables.
However, UBS India strategist Anubhav Agarwal believes the budget's impact on markets could be limited if capex, consumption boosts are constrained by a fiscal deficit of less than 4.5% of GDP in FY26.