Interim Budget 2024: Trading strategy for Budget Day by HDFC Securities, Arihant Capital, 3 others
Interim Budget 2024: Experts say investors and traders should exercise caution on Budget Day as stocks often react in advance to expectations.
Interim Budget 2024: Finance Minister Nirmala Sitharaman will present the Interim Budget for the financial year 2024-2025 (FY25) on February 1. Since the upcoming Budget 2024 is going to be a Vote on Account rather than a full Budget ahead of the General Elections this year, the government may not make major announcements on Budget Day.
Experts observe that this could not be a major event for the markets as the full-fledged Budget will be presented after the government formation. However, the government's focus is expected to remain on reducing the deficit, boosting manufacturing, and investing in infrastructure.
Mint gathered insights from five experts on the trading strategy for Budget Day. Here's their advice:
Deepak Jasani, Head of Retail Research, HDFC securities
Traders would be aware of the trend in the markets around Budget time.
The near-term move before the Budget will also influence the trader's strategy.
There could be volatility intraday (but less than that in a normal Budget).
If the Budget brings in a lot of rise in capex, rail and defence spending, we may see indices rising mildly during the event.
Arpit Jain, Joint MD, Arihant Capital
With the quarterly results season in full swing, and the Budget just around the corner, the volatility in the markets remains high.
The General Elections are due in May 2024, so this Budget will be interim only.
While we don’t expect any major announcements during this budget, we expect the government will include some popular measures such as more funding for programs like MNREGA to raise the daily earnings of rural areas to stimulate the sluggish rural economy.
We may also see the introduction of subsidies.
We also expect that the budget will support sustainable economic development by investing in infrastructure and enhancing the manufacturing sector as part of its “Make in India” campaign.
The Budget will also support the government’s intent to keep advancing the transition towards a greener economy that relies less on fossil fuels by focusing on renewable energy (like solar and wind), biofuels (like biogas, ethanol and green hydrogen), and electric transport.
Historically also, markets have always seen volatility until the Budget and based on the Budget outcome markets have either rebounded or taken a fall.
Hence, we recommend traders to be cautious and book profits and wait until after the budget to take a long-term call.
Maintaining a strict stop-loss is also important otherwise volatility can eat up all the profits.
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Shrey Jain, Founder and CEO of SAS Online
Ideally, the stock-specific bets should be initiated in line with market direction after the Finance Minister ends her speech.
Investors with a positive view of the market should opt for a bull call spread strategy.
Typically, the volatility is at its peak before the Budget speech begins and goes down as the speech ends.
The best way to play the high volatility is by employing a short strangle with a clearly defined stop loss on both legs.
Here the investor makes money if the underlying remains in a narrow range.
We expect the index to trade in a narrow range on the Budget Day, as the Interim Budget may not have big bang announcements.
Traders need to stick to stop loss and take cues from price action.
Also Read: Budget 2024: What should your trading strategy be ahead of FM Nirmala Sitharaman's announcements?
Santosh Meena, Head of Research, Swastika Investmart
While the upcoming Budget sparks excitement, I advise investors and traders to exercise caution on the actual day.
Many stocks react in advance to expectations, often reversing or experiencing high volatility when the details are unveiled.
Therefore, it's prudent to focus on a stock's long-term outlook rather than short-term budget buzz.
The market is plummeting ahead of the budget, fueled by profit booking from foreign investors.
The 21,000-20,800 zone is a crucial support level, while Nifty needs to break through the 21,800-21,850 resistance to regain its momentum.
The upcoming Budget is poised to spotlight capital goods and infrastructure, reflecting the government's commitment to robust spending in these areas.
Green energy stocks are in focus due to the government's emphasis on renewable energy, while the promotion of domestic tourism makes related themes attractive.
Investors are likely to keep a close eye on these sectors as key beneficiaries of the budgetary priorities.
Mandar Bhojane, an equity research analyst at Choice Broking
On Budget Day, it is important to have a smart trading plan, especially with the market being unpredictable.
Focusing on indices, especially Bank Nifty, it's more volatile because it reacts strongly to news about the banking sector, making trends clearer.
Unlike Nifty, which encompasses diverse industries and may be influenced by conflicting news, Bank Nifty typically exhibits a more distinct upward or downward movement.
This clarity in trends serves as a valuable tool for traders, enabling them to make more informed and strategic decisions in response to the market dynamics surrounding the banking sector on Budget Day.
To reduce the risks associated with individual stocks and potential losses on Budget Day, it's wise to stick to trading indices.
The day can be split into two parts: the first half sees market ups and downs before the budget speech, creating opportunities for strategies that don't rely on a specific direction, like straddles or strangles.
In the second half, after the budget speech, the market tends to follow a clear trend, allowing for profitable trades based on the information revealed.
This two-phase approach lets traders make the most of the different aspects of Budget Day, adapting their strategies to both uncertainty and the chances that emerge after important announcements.
Read all Budget-related news here
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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