Testing Semi-Strong Form Market Efficiency around Union Budget Announcements in India

Efficient Market Hypothesis, Semi-Strong Form Efficiency, Union Budget, Event Study, Abnormal Returns, Indian Stock Market, Nifty 50

This study examines whether the Indian stock market exhibits semi-strong form efficiency around Union Budget announcements by analysing price adjustments to publicly available fiscal policy information. Using event study methodology, daily closing prices of Nifty 50 index constituents were analysed across ten Union Budget announcements from 2015 to 2024. A market model with 120-day estimation window and (−15, +15) trading day event window was employed to calculate abnormal returns (AR), average abnormal returns (AAR), and cumulative average abnormal returns (CAAR). Statistical significance was tested using t-tests at 5% level. Results indicate statistically significant abnormal returns on budget announcement days and immediate post-announcement periods (days 0 to +3), suggesting short-term under-reaction. However, CAAR converged to zero within 10 trading days post-announcement, supporting semi-strong form efficiency in the medium term. Sectoral heterogeneity was observed, with banking and infrastructure sectors showing stronger reactions than FMCG and IT.