Budget 2024 is anticipated to bring heightened volatility to the Nifty 50, prompting a strategy of short strangles on February 1.
The Interim Budget for 2024 is not predicted to make a significant impact on the stock markets, given that the full-fledged Budget is scheduled after the government formation. Analysts on Dalal Street suggest that trading opportunities may be limited.
The Interim Budget is expected to lack major policy changes or new announcements but will lay the groundwork for future decisions. It will be closely scrutinized for fiscal consolidation rates and priorities for capital and non-capital expenditures. Finance Minister Nirmala Sitharaman, declaring it a vote of account, implies no significant policy changes.
As a Vote on Account allows interim spending without specifying expenditures, receipts, tax changes, or government policies, substantial alterations are not expected this time.
Experts believe the Interim Budget won't be a major event for the stock market, with focus likely on reducing the deficit, boosting manufacturing, and investing in infrastructure.
Trading strategies for the interim budget day focus on key stocks, market levels, and sensitive sectors for February 1.
Stocks in focus: While opportunities may be limited due to the interim nature of the budget, the renewable energy and railway themes with Borosil Renewables Ltd and RVNL are considered viable despite recent gains.
RVNL has surged significantly in 2024, driven by expectations of fresh investments in railway infrastructure development.
The market outlook is positive, anticipating continued upward movement towards 22300, provided dips stay above 21500. Option traders are advised to consider the usual rise in VIX ahead of the budget, favoring short strangles on Nifty 50.
Trading strategy: Budget sessions are known for high volatility as markets react to announcements. Experts advise strict stop-loss measures and recommend trading only when clarity emerges from budget announcements.
Sectors such as infrastructure, finance, hotels, railways, and manufacturing are expected to see increased price volatility and trading volume. Traders are advised to wait for volatility to subside before accumulating stocks showing strength.
Derivatives Outlook: In the derivatives market, the Nifty weekly contract indicates the highest open interest at 22000 for Calls and 21000 for Puts. Monthly contracts show the highest open interest at 22500 for Calls and 21500 for Puts. Foreign Institutional Investors (FIIs) adjusted positions, increasing index longs and decreasing index shorts. Notable changes in open interest for Call and Put options indicate increased activity in the derivatives market.
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