Budget 2024: Rahul Ghose of Hedged.in gives a low-risk trading strategy for July 23; favours infra, IT, railway stocks

Finance Minister Nirmala Sitharaman is set to unveil the newly elected Modi 3.0 government's first Union Budget 2024 on Tuesday, July 23, 2024. In the run-up to the big event, the Indian stock market has had a historic bull run, with the frontline indices hitting lifetime highs driven by optimism around the growth-oriented budget, expectations of robust April-June quarter earnings for fiscal 2024-25 (Q1FY25) by Indian corporates, and steady progress of the monsoon.

As investors would be interested to understand the trading strategy for July 23 when the Union Budget will be presented, Rahul Ghose, Chief Executive Officer (CEO) of investment tech platform Hedged.in, discusses key stocks, important market levels, and the most sensitive sectors to watch out for on July 23.

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Budget 2024 Preview

Most brokerages expect the government will prioritise rural sector growth, expansion of the production-linked incentive (PLI) scheme, and high monetary assistance for states in the upcoming Union Budget, in addition to providing tax relief to salaried employees. Job creation and capital expenditure also remain key thrust areas.

‘’With the Modi government falling short of a full majority, the inclination towards a populist budget cannot be ignored. This could mean increased spending on social welfare schemes, rural development, and subsidies to win favour with the electorate. Conversely, there's also a strong likelihood that the government will continue its reformist stance to boost economic growth, improve infrastructure, and attract foreign investments,'' said Rahul Ghose.

Also Read: Expert View | Budget 2024 to expand PLI; traders must follow staggered investment: Master Capital’s Gurmeet Chawla

Stocks, sectors to watch out for on July 23

According to Ghose, the sectors expected to do well are infrastructure, railways, and IT, to name a few. The specific stocks to watch out for on July 23 are Dilip Buildcon, L&T, BEML, Titagarh Wagons, BEL, and Suzlon Energy.

Nifty 50, Derivative Levels

Looking at the picture from the institutional perspective, the recent FII longs touching historical numbers, and Nifty passed 24,500; the top is within kissing distance and around the corner. The current OI concentration is at the 24,500 mark for both the July and August series, with the highest put writing at the 24,000 level and the highest call writing at the 25,000 level. 

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This places the markets very even with no real indication of build-up for the next big event to hit markets later this month. If there is any indication at all, it shows a range between the 24,000 and 25,000 levels. ‘’The market domination indicator, the proprietary tech we use to forecast levels, is pegging the maximum upside at the 25,250 levels,'' said Ghose.
 

Trading Strategy

Ghose provides a low-risk strategy in derivatives that one can apply, keeping in mind the turbulent nature of the budget.

The Strategy :

Nifty Modified Collar

(+1)Buy Nifty August Futures

(+1)Buy Nifty August 29, August 24,500PE at 340

(-1)Sell Nifty August 1, 24,600CE at 340

Capital involved in the trade is: ₹48,000

Risk in the trade is ₹2,000

Max reward is Reward: ₹4,500
 

Also Read: Expert View | Budget 2024 to boost domestic cyclicals, traders must avoid knee-jerk reactions: Alchemy’s Alok Agarwal
 

Possible Modifications: ‘’In case Nifty Moves below the 24,000 level, we can roll the 24,600CE from the August 1 expiry to the subsequent expiration to lower the debit. Always make sure that you sell strikes at 24,500CE or above only. The trade should start yielding results in the first week of August if not before,'' said the market expert.
 

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.