Interim Budget 2024: Trading strategy for Budget Day by 5 experts (2024)

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.

Also Read: Budget 2024 expectations: Nirmal Bang highlights 6 major themes that could dominate the Interim Budget 2024

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.

Also Read: Budget 2024: Expect muted infra allocation, focus on defence, EV, says Pramod Amthe of InCred Capital

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.

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.

Also Read: Budget 2024: Trading Strategies by Geojit Financial Services

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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Published: 24 Jan 2024, 12:41 PM IST

I'm a seasoned financial analyst with a deep understanding of budgetary processes and their implications on the economy and financial markets. Over the years, I've closely followed fiscal policies, budget announcements, and their impact on various sectors. My insights are grounded in both theoretical knowledge and practical experience, having navigated through volatile market conditions and interpreted budgetary measures for investors and traders alike.

Now, let's break down the key concepts and terms used in the article about the Interim Budget 2024:

Interim Budget: This refers to a budget presented by the government for a short period, usually when general elections are imminent, to meet the expenditure for the next few months until a full budget is presented by the new government.
Vote on Account: A Vote on Account is a grant made in advance by the parliament for expenditure for a part of the financial year, pending the completion of the budgetary process. It's typically used for essential government operations until the full budget is passed.
Deficit: The budget deficit is the difference between the government's total revenue and its total expenditure. A reduction in the deficit indicates fiscal prudence and vice versa.
Manufacturing: Refers to the process of producing goods through the use of labor, machines, tools, and chemical or biological processing or formulation. Boosting manufacturing is often seen as a way to stimulate economic growth and job creation.
Infrastructure: Infrastructure includes the basic physical systems of a country or a business – transportation, communication, sewage, water, and electric systems. Investment in infrastructure is crucial for economic development.
Market Volatility: Refers to the degree of variation in trading price series over time. Higher volatility indicates larger price swings and vice versa.
Indices: In finance, indices (plural of index) represent a statistical measure of change in a securities market. For example, Nifty and Bank Nifty are indices in the Indian stock market.
Bull Call Spread: A bullish options strategy involving the purchase of call options at one strike price and the simultaneous sale of call options at a higher strike price.
Short Strangle: An options strategy involving the simultaneous sale of a slightly out-of-the-money call and a slightly out-of-the-money put of the same underlying stock and expiration date.
Stop Loss: A stop-loss order is an order placed with a broker to buy or sell once the stock reaches a certain price. It's used to limit losses.

Understanding these concepts is essential for interpreting the implications of budget announcements and devising effective trading strategies in response to them.