In a technical note, Emkay Global noted that most stock indices including Nifty and sectoral ones showed a higher percentage of positive closes, ranging from 55 per cent to 91 per cent, in the first week post Union Budgets, indicating a bullish tendency in the very short term.
In the two-week period, the percentage of positive closes decreases for most indices compared to the one-week period, post Budgets, indicating a reduced bullish momentum. The one month scenario looks a bit different, as the percentage of positive closes further declines for most indices, with indices reflecting more negative closes than the positive ones.
Emkay said one-week traders may benefit from focusing on sectors like pharma, media, and IT, which have historically showed consistent positive performance in the short term. The ones with over on-month investment horizon should be cautious, as most indices tend to underperform over a one-month period. Sectors like pharma and IT may still offer opportunities to them, but careful analysis is required, the brokerage said.
"High-volatility sectors like Realty and Metal may offer significant gains but come with higher risks, especially over longer periods," Emkay Global said.
In the first week post Budget, history suggests the NSE Pharma index stands out with a 91 per cent positive close rate and an overall return of 3 per cent, making it the best-performing index in this period. The NSE Media also performs well, with an 82 per cent positive close rate and an overall return of 2 per cent.
"Indices like Nifty Realty and Nifty Oil and Gas have a lower percentage of positive closes (55 per cent and 45 per cent, respectively), suggesting weaker short-term performance," Emkay Global said.
In the first two weeks period, the PSU Bank index shows a significant drop in positive closes from 7 per cent to 36 per cent, with an overall return falling to nil. The NSE Pharma continues to perform well, with a 73 per cent positive close rate and an overall return of 2 per cent. The NSE Metal and Nifty Realty show mixed performance, with high average positive returns but a lower percentage of positive closes.
In the first month post Budgets, the NSE Metal has the highest average positive return (11 per cent) but only a 45 per cent positive close rate, indicating high volatility.
"PSU BANK performs poorly, with only a 27 per cent positive close rate and a significant average negative return (11 per cent), resulting in an overall negative return of 3 per cent. NSE IT Index is an exception, with a 45 per cent positive close rate and an overall return of 2 per cent, driven by a high average positive return (7 per cent)," Emkay said.
Emkay said Pharma and IT sectors show resilience across all time periods, with relatively high percentages of positive closes and strong overall returns. The NSE Pharma index is particularly consistent, with the highest positive close rates and overall returns.
Bank Nifty and Private Bank indices show moderate performance in the short term but weaken over longer periods. PSU Bank performs poorly in the medium and long term, with significant negative returns. Realty and Metal sectors exhibit high volatility, with large average positive and negative returns, the brokerage said.
Nifty Realty shows a sharp decline in positive closes over time, from 55 per cent (1 week) to 36 per cent (1 month) while FMCG and Consumer Discretionary indices show relatively stable but low overall returns, with a tendency toward negative performance in the long term.