Indian stock market likely to be highly volatile on Budget Day; what should be your trading strategy?
Budget Day trading strategy: The Union Budget 2025 is expected to benefit sectors like healthcare and infrastructure, while traders should be cautious on Budget Day due to potential volatility.
Budget 2025: Indian stock market is enjoying a pre-budget rally; benchmark index Nifty 50 has been on an upward trajectory for the last four sessions, overall gaining 3 per cent.
On Friday, January 31, the Nifty 50 vaulted 1.11 per cent to close at 23,508.40 after the Economic Survey 2025 expressed optimism that India's economic growth may remain stable in the coming financial year (FY26) and inflation could come down gradually to 4 per cent despite global uncertainty.
"The Economic Survey 2025 suggests that the Indian economy is expected to grow despite global challenges. India would be able to keep an eye on inflation. Capex expansion has sustained signals of improved quarterly numbers from the listed entities, and stability in the banking sector is also a positive sign for the rate-sensitive segments," said Avinash Gorakshkar, the head of research at Profitmart Securities.
Budget-day trading strategy
The Budget is a major policy event, and stock markets tend to be volatile on Budget days. Historical data show that the Indian stock market has moved less than 1 per cent on Budget Day only eight times in the past 25 years.
Experts say investors and traders should brace for high volatility on Saturday, February 1, despite the high expectation that Finance Minister (FM) Nirmala Sitharaman will present a pro-growth, reform-oriented Budget.
"Budget Day is filled with trading opportunities based on the real-time announcements that the FM makes across sectors, but one has to be careful as the price moves are generally in either direction," said Aamar Deo Singh, Senior Vice President of Research, Angel One.
Singh underscored many trade opportunities on Budget Day, more so in indices via the options route, such as straddles and strangles.
He said it would be prudent to avoid trading as much as possible as the probability of stop-losses getting triggered is extremely high due to heightened volatility on either side.
According to experts, investors and traders may consider buying stocks in rate-sensitive sectors, such as automobile, banking, real estate, infrastructure, and capital goods, as expectations are high that the rate reduction cycle will start soon in India.
"The Economic Survey hints at the beginning of the lower interest rate regime in FY26, which is expected to fuel banking and allied segments. I expect buzz in rate-sensitive segments like auto, banking, real estate, infrastructure, and capital goods. Investors may consider buying shares from these segments before the budget for 2025," said Gorakshkar.
Sensex, Nifty 50, Bank Nifty key levels
Singh expects the Nifty 50 to face resistance around the 23,700 and 24,200 levels. However, the index has support around the 23,000 and 22,700 levels.
According to Singh, Sensex has resistance around the 78,500 and 79,200 levels, while support is seen around the 76,300/75,200 levels.
For Bank Nifty, resistance is at 50,200 and 50,800 levels, whereas support is around the 48,500 and 47,800 levels, as per Singh.
"Key levels have already been touched upon in the above section, but if we look at the overall chart and the structure of the intermediate-term trend, we will see that there continues to be selling pressure at higher levels. Hence, one should ideally wait it out for the market to react after the Budget announcements," said Singh.
Focus on the long-term
The Budget has a long-lasting impact on the economy. Therefore, it offers several long-term opportunities.
Experts say traders should avoid being too fixated on trading on Budget Day.
"Out of 365 days, Budget Day is just 1, so do not be very fixated on trading on Budget Day itself unless you have a clear risk management policy in place, as extreme moves in either direction are very likely, given the past track record of action on Budget days," said Singh.
"Markets are there to stay and opportunities are also there to stay, hence too much of fixation on trading on the Budget Day might not be a very good idea, unless you spot opportunities, which you had been waiting since long. Best of luck & trade light," Singh said.
The Union Budget 2025 is expected to focus on sectors such as pharma and healthcare, renewable energy, electric vehicles, infrastructure, textiles, banking, and finance.
Singh believes most of these sectors have the potential for significant gains over the long term, provided investors adopt a SIP mode and invest in leading stocks in these sectors with a diversification plan.
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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
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