Market events that build up high degree of uncertainty and expectation are an interesting case to study the relationship between liquidity and equity return in any economic system. This study examines the day long effect of liquidity on the equity return in the day during government budget announcement. Using the OLS and ARDL models, the study establishes the direction and magnitude of relationship between different liquidity proxies and intraday stock returns in Indian equity market. The empirical evidence suggests that returns have significant dynamic negative relationship with liquidity measures. Further the effects of liquidity on stock returns are relatively prominent during the period of budget speech than the period of post budget announcement. The study concludes that the absolute spread as a liquidity measure plays an important role in driving a day long equilibrium dynamics of intraday stock returns in Indian market.