How important is the stockmarket reaction to the Budget?
The stockmarket is seen as the barometer of the economy. The market always factors in the performance of the economy, sectors of industry and individual companies into share prices. So, on the face of it, the stockmarket reaction to the Budget should serve as a good method of evaluation of the Budget. However, the market does tend to produce knee-jerk reactions, without fully understanding the implications of particular proposals. This sudden reaction gets corrected in time, as market players comprehend the Budget proposals and these get reflected in the share prices. Therefore, one must not go by the immediate reaction in stock prices to the Budget, but look at it over a longer time horizon.
