The Finance Ministry conducted the traditional halwa ceremony on Tuesday, signaling the commencement of the most guarded phase of Union Budget 2026-27 preparation. Finance Minister Nirmala Sitharaman attended the ceremony alongside senior officials and key staff responsible for preparing the annual financial statement scheduled for presentation on February 1.

Lock-in Phase and Confidentiality Measures

Following the halwa ceremony, approximately 60-70 officers will enter a strict lock-in period, remaining isolated from outside contact until the Union Budget 2026-27 is presented before Parliament. This stringent confidentiality measure ensures no advance disclosure of tax plans, spending decisions, or policy announcements.

Deregulation Focus and Economic Growth Strategy

The Union Budget 2026-27 is widely anticipated to emphasize deregulation across multiple sectors. The government aims to simplify regulatory frameworks, reduce compliance demands, and streamline business processes as India navigates challenging global economic conditions.

Policymakers are expected to target laws and procedures that create delays in investment, trade, and manufacturing activities. The deregulation initiative will be complemented by measures supporting domestic manufacturing, exports, and private capital investment. By eliminating regulatory obstacles and shortening approval timelines, the government seeks to strengthen supply chains and foster long-term economic growth while enhancing competitiveness for Indian industry.

Printing Operations and Administrative Logistics

Despite the Ministry of Finance relocating operations to Kartavya Bhavan last year, printing for Union Budget 2026-27 will continue at the North Block press. While new equipment has been installed at Kartavya Bhavan with trial runs underway, officials prefer utilizing the established North Block facility this year to maintain reliability and security protocols.

The lock-in period, historically tied to physical printing requirements at North Block, now reflects both digital workflows and security considerations. With most budget preparation conducted electronically, the duration of official seclusion has decreased in recent years.

Cultural and Administrative Significance

The halwa ceremony carries both cultural and administrative importance in the budget preparation process. In Indian tradition, sharing the sweet dish represents an auspicious beginning for significant undertakings. Administratively, it marks the conclusion of drafting and discussion phases, signaling the Budget document's entry into its final, tightly controlled stage.

Even as Union Budget 2026-27 preparation increasingly relies on digital processes, core confidentiality protocols remain unchanged. The lock-in mechanism prevents any potential leakage of fiscal data, including tax modifications, expenditure plans, and new policy initiatives. With the ceremony completed, the Budget process enters its final phase before the February 1 parliamentary presentation.

The era of dramatic market swings on Budget Day appears to be ending, as India's financial markets show increasingly muted reactions to the Union Budget announcement. This shift reflects a fundamental change in how policy decisions are communicated and implemented throughout the year.

Market volatility around Budget Day has declined significantly, with expectations becoming more measured as investors focus on medium-term policy direction rather than single-day announcements. The finance ministry will present the FY27 Budget on 1 February 2026, at a time when it appears fairly placed to meet its 4.4% of GDP fiscal-deficit target, despite weak nominal GDP growth and sharp cuts in personal income tax and GST.

Diminishing Budget Day Impact

A comprehensive analysis reveals that Budget Day has failed to stir markets meaningfully over the past three years. The data shows a clear pattern of reduced market reaction:

"The Budget is no longer the sole 'Big Bang' now," said Dhiraj Relli, managing director and chief executive of HDFC Securities. This transformation stems from policymaking becoming more continuous, predictable, and front-loaded, with key reforms and incentives now rolled out through cabinet decisions, press releases, and GST Council meetings throughout the year.

Pre-Budget Positioning Becomes Key

Historical data from the past 16 years demonstrates that markets typically make their biggest moves well before Budget Day, leaving the actual speech with limited impact. The pattern shows investors increasingly position themselves in advance rather than react to announcements.

Notable examples include 2021, when the Sensex rallied 22% in the three months leading up to the Budget, only to slip 2% in the final 15 days and show a marginal 0.25% move on Budget Day. Similarly, in 2022, the index fell about 3% in the 15 days before the Budget, while the three-month return was 0.2% and Budget-day gain stood at just 1.2%.

Historical Volatility Patterns

The shift becomes more apparent when comparing recent years with earlier periods. Budget Day was once marked by sharp market swings rather than lacklustre moves:

Since 2010, the three months before the Union Budget have consistently been marked by elevated volatility. In nearly half of these years—eight in total—the benchmark index has declined during this pre-Budget phase, reflecting rising uncertainty as investors attempt to price in policy signals ahead of time.

Sector Impact Remains Significant

Despite reduced overall market volatility, the Budget continues to influence sector leadership throughout the year. The 2025 focus on consumption led to rallies in fast-moving consumer goods (FMCG) and automobile stocks, while the defence sector experienced profit-booking.

Market consensus suggests the upcoming Budget will emphasize:

• Increased capex on infrastructure, defence, and railways
• Higher defence outlay to buffer the economy
• Support for MSMEs, manufacturing, and green energy
• Focus on artificial intelligence and export promotion

Economic Outlook and Fiscal Targets

Brokerages have provided mixed assessments for the upcoming Budget. Kotak Institutional Equities pegged FY27 GDP growth at 4.3%, factoring in slower fiscal consolidation and sustained capex, particularly in defence and state loans. BofA Securities noted in a 14 January report that the Ministry of Finance remains on track to hit its medium-term fiscal target of below 4.5% of GDP.

According to Madhavi Arora, chief economist at Emkay Global Financial Services, the Budget will be closely tracked for signals on bond yield trajectory, fiscal consolidation approach, and both pace and quality of capital expenditure allocations. Steps to ease the tax regime for foreign investors will also be crucial for improving India's investment appeal.

This evolution from event-based to process-led policy represents a maturing market where continuous reforms have replaced the traditional 'surprise factor' of Budget Day, signaling a more predictable and stable policy environment for long-term investors.