Loading
Market Intelligence › News And Updates
Fiscal deficit, the borrowing programme, capex — and the truth about budget-day volatility
Published by The Retail Trader · AUG 09, 2026 · Features
On budget day, announcements run on TV for two hours and the market keeps bouncing up and down. But the things that actually have an effect for months are often not in the speech, but in the documents.
Apart from the noise of the speech, these are worth watching:
• Fiscal deficit — how much more the government is spending than it earns. This sets the mood of the whole bond market.
• Gross borrowing programme — how much the government is going to borrow from the market. More borrowing means more bond supply, and upward pressure on yields.
• Capital expenditure — how much the government itself is spending on construction. This is a direct demand signal for sectors like infrastructure, cement and capital goods.
Higher government borrowing puts pressure on bond yields. Rising yields mean money gets costlier across the system, and pressure on equity valuation.
So a budget that gives a large spend but keeps borrowing under control is liked more by the market — even if the headline announcements are few.
Capital gains, securities transaction tax, dividend taxation — any change in these directly affects the retail investor.
These announcements are often a single line in the speech, with the full detail in the Finance Bill. So opinions on budget day often change two days later, when people read the fine print.
On budget day the market swings a lot and a large part of that swing is noise. One sector rises on one announcement and falls on the next.
Drawing a trend from that day's chart is often pointless. The more useful thing is to see which sectors held their stride over the next two to three weeks — because that is the real reaction.
Keeping leverage low on big positions before the budget is a common precaution — not because the budget will be bad, but because predicting price behaviour on that day is almost impossible.
And after the budget, read the outcome against expectations. The market has already priced in a lot, so even a 'good budget' can bring a fall.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.