NewsStocksMarket Expert Expects Union Budget to Reverse Current Weakness, Cites Historical PatternsMarket Expert Expects Union Budget to Reverse Current Weakness, Cites Historical Patterns
Sushil Kedia expects the Union Budget to reverse current market sentiment, citing historical analysis showing 93% probability of Budget acting as sentiment reverser. He attributes recent weakness to multiple factors including valuation normalization after election-driven overvaluation and unnatural market movements suggesting informed selling, anticipating market bottom ahead of Budget followed by recovery.
*this image is generated using AI for illustrative purposes only.
Market expert Sushil Kedia expects the upcoming Union Budget to act as a sentiment reverser for Indian markets, contradicting the current downward trend. The founder of Kedianomics shared his analysis during an interview, highlighting historical patterns and multiple factors contributing to recent market weakness.
Historical Budget Patterns Suggest Sentiment Reversal
Kedia's analysis of approximately 45 Union Budgets, including interim ones, reveals a consistent pattern that challenges conventional market wisdom. His research shows only three instances where markets rose strongly before the Budget and continued moving higher afterward.
| Historical Pattern: | Outcome |
|---|---|
| Markets rising before Budget: | Only 3 instances continued higher |
| Markets falling before Budget: | Zero instances continued declining |
| Probability of sentiment reversal: | 93% |
"There is not a single event where the market was strongly down before the budget and continued to go down," Kedia stated. He emphasized that the stock market has been "an abject failure in India to anticipate the budget," describing the Budget as a "game changer for the market."
Multiple Factors Beyond Trump Impact
While acknowledging that US President Donald Trump has been affecting global markets, Kedia disputes attributing Indian market weakness solely to Trump's policies. He noted that global markets appear to absorb Trump-related impacts better than Indian markets, which are experiencing prolonged weakness.
"India's weakness is only because of Trump is, I think, an imagination," Kedia argued, suggesting multiple factors are converging to create current market conditions.
Valuation Normalization After Election Overvaluation
Kedia highlighted significant overvaluation in "Modi stocks" ahead of the 2024 general elections, describing them as "not richly, but ridiculously overvalued." The election results punctured this bubble, though indices initially masked the damage.
Since September 2024, widespread damage has become apparent across the market. This correction has normalized India's price-to-earnings valuation relative to global peers, resetting the previous overvaluation.
Unnatural Market Movements Signal Informed Selling
Over recent sessions, Kedia observed "unnatural" market movements suggesting informed selling, possibly indicating expectations of India-specific negative news such as geopolitical tensions or political turmoil.
He explained that when such events occur, informed participants typically act first: "If the market already has seen informed selling... the big boys have already done their action." This suggests potential negative news may already be priced into current levels.
Market Bottom and Recovery Expectations
Kedia anticipates "a final capitulation and therefore a market bottom" ahead of the Budget, followed by a strong post-Budget recovery. His analysis suggests that if negative developments emerge, much of the damage may already be reflected in current prices.
The combination of historical Budget patterns, valuation normalization, and potential pre-positioning by informed participants supports his expectation for sentiment reversal rather than trend continuation.
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