Budget winds fill the sails of retail investors. Will it last?
Subscribe to enjoy similar stories. Retail investors who had been strategically accumulating stocks during the market's 7.3% decline in the December quarter, betting on a rebound, were rewarded with the unveiling of the Union budget. A Mint analysis of 1,957 companies shows that individual investors (holding nominal share capital up to ₹ 2 lakhs) increased their ownership in approximately 51% of these companies between the September and December quarters.
This compares with nearly 49% of stocks that saw a sequential rise in stakes in the previous two quarters. These 51% of companies saw a median return of 0.2%, contrasting with a slight 0.5% decline after the previous budget. Among the stocks that experienced an increase in retail ownership on a sequential basis, almost 50% saw a rise in their stock prices on Budget day, extending gains up to 20%.
This positive market reaction after the budget announcements was only the third since 2019, including interim budgets, for retail investors. The only other two times retail investors saw positive median returns on their stock picks after a budget were during the pandemic years of 2021 and 2022. Government measures like MSME loans, increased state borrowing limits, farmer credit, and migrant food support boosted market confidence in those years, resulting in 5% and 1.5% gains for the Sensex, respectively, a welcome reversal of the typical muted or negative market reactions to past budgets.
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