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Stock Market Reactions to Union Budget Announcements: An Econometric Assessment

Author

Listed:
  • Karri Srinivasu
  • M. Prathyusha

Abstract

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.

Suggested Citation

  • Karri Srinivasu & M. Prathyusha, 2025. "Stock Market Reactions to Union Budget Announcements: An Econometric Assessment," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 122-140.
    • Handle: RePEc:ers:ijebaa:v:xiii:y:2025:i:1:p:122-140
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    More about this item

    Keywords

    Union budget; event study; Indian stock market; fiscal policy; market efficiency; GARCH; sectoral analysis.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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