Finance Minister Nirmala Sitharaman will present the Interim Budget for the financial year 2024-2025 (FY25) on February 1, ahead of the general elections this year. The finance minister’s declaration that it will be a vote of account suggests that no significant policy announcements are likely to be made in the interim budget.
Because an Account Vote is only a temporary authorization to spend money, as opposed to a full Budget, which includes details of spending and receipts, including tax changes and government policies, this time around significant tax and policy changes are unlikely.
Experts observe that this could not be an important event for the stock market, as the full-fledged Budget will be presented after the government formation. D-Street analysts also do not expect any deep impact on the frontline indices as trading opportunities will be limited. The government’s focus is expected to remain on reducing the deficit, strengthening manufacturing and investing in infrastructure.
As investors would be interested in understanding the trading strategy for tomorrow when the interim budget is presented, Anand James, Chief Market Strategist, Geojit Financial Services discusses key stocks, important market levels and the most sensitive sector to watch out for on February 1. .
Read also: Budget Expectations 2024: From capex to fiscal deficit, CareEdge predicts these changes for India’s economy
Stocks focused on February 1st
The game around budget day is usually about stocks that could benefit from favorable announcements, but with February 1 only an account budget vote, opportunities may be limited, according to Geojit’s market strategist.
“However, we do well to play the renewable energy theme as well as the railway theme through Borosil Renewables Ltd and RVNL respectively, despite having recently registered big gains. Meanwhile, Nifty benefited from the rise in Reliance and Adani shares, helping the index touch a distance of 21,800 , a region that has attracted declining trades recently,” said Anand James of Geojit.
According to BSE data, the shares of RVNL or Rail Vikas Nigam have already grown 62 percent in 2024 so far and 89 percent in the last three months. The stock has become a multibagger in the past six months and has gained 144 percent in the said period. In the last one year, RVNL stock has delivered a massive return of 306 percent. Indian Railways shares have multiplied investor money by 727 percent in two years and 840 percent in three years.
According to market analysts, the sharp rally in railway stocks was attributed to the anticipation that the central government will reveal fresh investments for the development of railway infrastructure in the upcoming 2024 budget.
Nifty 50 levels
“We remain positive for a sustained rise to 22,190 as long lows are contained above 21,490, but would be forced to consider 20,900 if we recover below 21,330,” said Anand James.
Options traders would do well to note that VIX typically rises in the fortnight before a budget, with last year seeing a 66 percent rise over the same period, only to see a steep drop in VIX, post-budget, according to the market expert.
“Although the full-year budget is only in July, the VIX’s rise from the fortnight’s low is still on track, with a nearly 30 percent rise year-to-date. To that end, we prefer short strangleholds on the Nifty 50,” James added.
Read also: Interim Budget 2024: Budget Day trading strategy by HDFC Securities, Arihant Capital, 3 others
Business strategy
Budget sessions are usually marked with high volatility as markets tend to react to budget announcements for key sectors. D-Street experts advise that traders should keep a tight stoploss and trade only after clarity emerges from budget announcements.
Sectors such as infrastructure, finance, hotels, railways and manufacturing are likely to see higher price volatility and volume loads. Experts say traders should wait for volatility to subside and can stock up on stocks that are showing comparative strength.
Overall, James of Geojit Financial Services expects volatility to remain during the market session tomorrow as the Nifty 50’s long dips are likely to be contained above the 21,490 zone.
Derives Outlook
Nifty weekly contract has highest open interest (OI) at 22,500 for Calls and 21,500 for Puts while monthly contracts have highest open interest at 23,000 for Calls and 21,000 for Puts. Highest new OI addition was seen at 22,400 for Calls and 21,600 for Puts in weekly and at 21,700 for Calls and 21,700 for Puts in monthly contracts.
FIIs increased their index futures long positions by 12.62 percent, decreased index futures short positions by 2.88 percent and in index options by 53.08 percent increase in Call lengths, 56.85 percent increase in Call shorts, 64.70 percent increase in Put lengths and 88.83- percentage increase in Put shorts.
Disclaimer: The views and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 31 Jan 2024, 08:22 IST