Is Budget 2026 shaping market expectations? Traders and investors are already positioning themselves as the big day approaches, with volatility rising and selective sector trends emerging. Historical patterns show markets struggle in the weeks before the Union Budget, as participants balance risk and opportunity amid uncertainty.
Major indices showed uneven performance and heightened volatility ahead of the Budget session, with the Nifty falling by 1,080.95 points and the Sensex declining by 3,682.90 points on 27 January 2026. Analysts mark a little broad-based rally and cautious sentiment among participants. Additionally, some sectors, such as PSU banks and power stocks, are drawing specific interest even as wider participation remains measured.
This is why we bring this blog to you to frame Budget 2026 trading strategies around risk, timing, and market trends. Keep reading!
What is the Union Budget?
The Union Budget is the Indian government’s annual financial plan, which is presented by the Finance Minister in the Parliament on 1st of February. This states how the government plans to raise money and spend it in the next financial year.
This covers the fiscal policy decisions on taxation, public spending, subsidies, infrastructure outlays, and policy priorities across sectors such as agriculture, manufacturing, infrastructure, and social welfare. The Union Budget signals the Indian government’s economic direction, while influencing market sentiment, sector trends, and investor expectations for the financial year ahead.
Trading Strategies
Based on market analysis for the upcoming Union Budget on February 1, 2026, here is a breakdown of strategies, performance, and considerations for traders and investors.
January and February Performance
January 2026 has been challenging for the Indian stock market. Both the Sensex and Nifty are about to end the month lower, with the Sensex down about 4.32% and the Nifty about 4.13% on 27 January 2026, as benchmark indices faced selling pressure from foreign investors, global headwinds, and weak earnings signs.
Historical data show that January has been a weak month for NIFTY for most of the years leading up to the Union Budget. Here’s a view between 2019 and 2025, showing how January delivered negative returns ahead of the Union Budget.
| Year | January Returns (%) |
| 2019 | –0.3% |
| 2020 | –1.7% |
| 2021 | –2.5% |
| 2022 | –0.1% |
| 2023 | –2.5% |
| 2024 | 0.0% |
| 2025 | –0.6% |
| Median | –0.58% |
February, which includes the Budget announcement and its immediate aftermath, has been more volatile.
| Year | February Returns (%) |
| 2019 | –0.3% |
| 2020 | –6.3% |
| 2021 | +6.4% |
| 2022 | –3.2% |
| 2023 | –2.0% |
| 2024 | +1.1% |
| 2025 | –5.9% |
| Median | –2.03% |
From 2019 to 2025, February returns swung widely, with a median return of around –2%, underscoring how markets reassess growth, taxation, and fiscal priorities after the Budget.
Budget Day
An analysis of 15 Union Budgets from 2010 to 2025 shows that Budget Day itself has a limited market impact. The NIFTY 50’s average return on Budget Day is 0.19%, indicating muted same-day movement.
And since 2017, when the Budget shifted to 1 February, this trend has continued, where the market tends to weaken in the week before the Budget, while the week after the Budget Day delivers stronger returns, with NIFTY averaging gains of 1.35% and Bank Nifty about 1.69%, as policy details get absorbed.
Intraday Range
A useful way to understand intraday price movement around Union Budget sessions is how wide the market swings during the trading day itself.
The historical Budget-day price action found that the intraday range of the NIFTY 50 has varied from about 0.8% to as high as 4.9% on past Budget Days. The median intraday range is around 2.07%, meaning that on a typical Budget Day, the difference between the high and low prices can span just over 2% of the index level. This gives traders a practical frame of reference for planning entries, exits, and position sizing on high-volatility sessions like the Budget Day.
Rebalance Your Portfolio
Rebalancing is adjusting holdings as risks and opportunities shift. Sector performance has been uneven before Budget 2026, for instance, realty stocks fell up to 28% on 29 January 2026, while sectors linked to public spending showed relative strength.
This might push the investors to increase investments in large-cap stocks for stability, rotate toward defensive and capex-focused sectors such as infrastructure, manufacturing, and defence, and reduce exposure to high-beta stocks that are sensitive to interest rates or have already seen sharp run-ups.
Diversify Your Holdings
When markets are uncertain around policy changes, having investments across defensive sectors such as healthcare and FMCG, and cyclical sectors such as banks and industrials could reduce concentration risk.
In January 2026, while benchmark indices weakened overall, sectors such as infrastructure, railways, defence, EV, and manufacturing showed strength, illustrating why sector diversification matters.
Use Stop-Loss Orders
Price swings after the budget have been historically sharp and quick, and placing predefined stop-loss levels protects capital if the support levels break. A tested approach for intraday option setups involved applying a fixed stop-loss of 20% on each leg of a short straddle trade.
Using such fixed stop-losses has shown more consistent results across intraday time windows compared with combined premium stop-loss structures, suggesting disciplined risk limits can help contain losses during sharp intraday swings.
Monitor Market Reactions to the Budget
Currently, the markets aren’t only reacting to Budget Day headlines, they’re watching signals of stability and policy continuity that influence sentiment beyond the numbers.
- The investors and allocators are focused on whether Budget 2026 will reinforce fiscal credibility, predictable policy frameworks, and long-term earnings visibility.
- Market participants prioritise reassurance about growth and fiscal discipline over short-term stimuli, as consistency and macro stability are what drive confidence in capital markets today.
Conclusion
The Union Budget brings caution, selectivity, and heightened sensitivity in the market. The data around January–February trends, budget day behaviour, and intraday ranges show that volatility is not unusual, but it is also not random.
For traders and investors, the focus stays on preparation: managing risk, staying diversified, rebalancing portfolios, and reacting calmly as clarity comes to the surface after the announcements.
Therefore, rather than chasing headlines, aligning Budget 2026 trading strategies with market behaviour, sector trends, and disciplined execution can help navigate this phase with more confidence and control.
