Budget 2024: Market may be volatile on Feb 1, reduce weight selectively, says Deepak Jasani of HDFC Securities

The upcoming Union Budget 2024-2025 will be an Interim Budget ahead of the general elections this year. Hence, there are no expectations of any major reforms from this Budget by Dalal Street veterans.

Deepak Jasani, Head of Retail Research, HDFC Securities expects the market to remain volatile on the Budget day, but the volatility would be less than that in a normal Budget. In an interaction with Livemint, Jasani said bond markets may be impacted if the gross borrowing number is much higher or lower than expectations. Here are edited excerpts:

What are the key expected reforms and their impact on the markets?

A. Although there would be some buildup of expectations ahead of the vote on account, we think that major policy reforms and announcements may get postponed to the regular Budget due in June/July 2024. Capex and the fiscal consolidation path followed in the vote on account would be monitored closely given their impact on growth and interest rates.

Also Read: Budget 2024: Bond market focus fixated on government’s fiscal discipline commitment, borrowing plan

While sops for two (poor and farmers) out of four castes (as per PM Modi) have already been announced time and again, some sops for the other two (women and youth) could be announced with minimal impact on the deficit. 

The capital markets may get a little excited by the vote on the account but may prefer to wait for the general election outcome and the regular Budget before getting very bullish.

What should be the investors’ strategy on February 1? Which sectors are likely to be in focus and which stocks may see momentum?

A. 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, railway or defence spending, we may see indices rising mildly post the event.

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The Finance Minister is likely to focus on the path of fiscal consolidation. How to trade in the bond market, given that the fiscal deficit target may be lowered for FY25?

A. The government is likely to stay on the fiscal course-correction glide path in the Interim Budget for FY25, shunning populist spending or incentives ahead of the summer general election. Bond markets may be impacted if the gross borrowing number is much higher or lower than expectations as this could lead to a rise or fall in G-Sec yields.

What are the expectations on the commodity market front?

A. Being a vote on account, not much impact is expected on the commodities front. High capex spend would however be conducive to base metal prices.

Also Read: Interim Budget 2024: Trading strategy for Budget Day by HDFC Securities, Arihant Capital, 3 others

What are the key levels on Nifty to watch out for ahead of the Budget?

A. Nifty rose sharply on January 29 forming a long bull candle. Buildup ahead of the vote on account seems to have started. This up move can be used for selectively reducing weight in individual stocks that have run up too fast. Levels of 21,851 - 21,970 could be the next resistance band for the Nifty while 21,482 could act as a support.

Read Budget 2024 Expectations Live Updates here

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