Budget 2024: What should your trading strategy be ahead of FM Nirmala Sitharaman's announcements?
Swastika Investmart. The Union Budget has always been one of the major trendsetters for the Indian market. Budget day is usually synonymous with market volatility.
In 2023, the Indian market fell 0.26 percent on the Budget day. It also rose 1.4 percent each on the day after the Budget announcement and was flat (up 0.07 percent) on the day before the Budget. Analysts anticipate that the market will be more volatile before the Budget than after.
But what should be one's trading strategy ahead of the Budget? Let's find out: Bolinjkar advises that traders should hedge their trades as volatility is expected to increase for the next 15 days. “We have witnessed 16 Budgets (14 full and 2 interim) from 2010 to 2023 and the returns haven’t been attractive on the budget day all these years. The average budget day returns in Nifty is 0.23 percent.
Nifty's average returns one week prior to the budget is -0.58 percent and one week after the budget is 1.37 percent," said Sheth. It’s obvious from the above data that on average Nifty normally trades lower ahead of the Budget. The main reason behind that is fear and uncertainty ahead of the event.
The moment the Budget event is over, the market quickly discounts it and starts trending higher. So if the Budget is not favourable then prices discount it immediately and make an intermediate low on the Budget day. If there is a positive surprise in the Budget, even then it trends higher, as per Sheth.
“Since this is going to be an interim budget, we don’t expect any major shocks or surprises. Markets had reacted to the last two interim budgets (2014 & 2019) on a positive note. Traders can look for long opportunities after the budget if their trading conditions are met," added Sheth.
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