Budget 2024 Trader’s Guide Navigating Tomorrow’s Announcements

As the clock ticks closer to the presentation of the Interim Union Budget 2024, traders across India are perched on the edge of their seats, eagerly awaiting announcements that could sway the markets. With the budget set to be unveiled in Parliament on February 1, 2024, at 11 am, and the general elections looming in April and May, anticipation is mingled with a sense of caution. No major shake-ups are expected this time around, given the proximity to the elections, yet the focus on capital expenditure, manufacturing, and macro stability suggests a strategic direction aimed at fostering long-term economic growth.

January has been a turbulent month for Indian indices, with a modest loss of about half a percent, reflecting the mixed signals from global markets and the volatility that typically precedes budget announcements. This year, however, the market’s response is not just about the budget; it’s also about digesting the outcomes of the Federal Reserve’s policy meeting that took place on January 31. The intertwining of local budget expectations with global economic policies sets a complex stage for traders.

Navigating Market Dynamics for Budget 2024

Suman Bannerjee, CIO of Hedonova, emphasizes that while the Interim Budget 2024 might not trigger dramatic shifts in the stock market or investor portfolios, it’s imperative to scrutinize any significant announcements for their potential market impact. The government’s continued focus on capital expenditure over short-term populist measures is a testament to its commitment to sustainable economic growth. Traders and investors alike need to understand this approach to navigate the financial markets effectively in the coming year.

Harinder Sahu, a SEBI-registered Research Analyst at King Research Academy, points out the importance of a critical analysis of pre-rally trends, which can serve as a reliable indicator for potential market movements. Despite uncertainties, there’s a 70% likelihood of positive outcomes, highlighting the necessity for vigilance and strategic decision-making on budget day.

Also read: India’s Interim Budget Journey in 2024

Strategic Positions for Traders

The budget 2024 is not just about the economic outlook, it’s a reflection of the nation’s ambitions, mirrored in the equity markets. Indian equity markets have enjoyed a notable gain of over 20% since last year’s budget, buoyed by domestic developments and favorable global scenarios. The benchmark index, in particular, has showcased impressive growth, reinforcing a bullish market sentiment. Traders are advised to watch for immediate support levels and consider quality buys on dips, while remaining selective in their approach, focusing on themes likely to outperform.

Historically, Union Budget announcement days have introduced significant volatility, with the Nifty50 index experiencing intraday movements of 2 to 3 percent in most cases over the last decade. The India VIX index typically rises leading up to the budget day, followed by a sharp decline during the budget speech, suggesting that strategies focusing on volatility, rather than direction, might be more profitable.

Various strategies, including shorting Straddle, Strangle, and employing Iron Fly and Iron Condor setups, have been tested with dynamic strike selection based on premium disparities. Results indicate that both Short Iron Fly and Short Iron Condor strategies have yielded profits in the majority of instances, with strategic hedging on Out of Money (OTM) wings mitigating losses even in outlier events.

Sectoral Bets and Long-Term Strategies

Jyoti Roy, Head of Equity Research at Sanctum Wealth, advises traders to position themselves before the budget by focusing on sectors like capital goods, industrials, and infrastructure. These sectors are expected to benefit from the Union Budget’s emphasis on capital expenditure and infrastructure growth. Additionally, the expansion and extension of Production-Linked Incentive (PLI) programs to more sectors could bolster manufacturing, presenting favorable opportunities for traders.

A Cautionary Note

While the insights and strategies outlined by experts provide a roadmap for traders ahead of the budget, it’s crucial to remember that markets are inherently unpredictable. The combination of local budgetary announcements and global economic policies adds layers of complexity to market dynamics. Traders should approach the budget day with a balanced mix of caution and optimism, ready to adapt their strategies to unfolding developments.

In conclusion, as we stand on the cusp of Budget 2024, traders are encouraged to look beyond immediate market reactions and focus on the long-term implications of government policies. The emphasis on capital expenditure, infrastructure development, and manufacturing growth points to a strategic approach geared towards sustainable economic expansion. By staying informed, analyzing pre-budget trends, and positioning themselves strategically, traders.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies and not of Today Spectrum. We advise investors to check with certified experts before taking any investment decision.