Stock market strategy for Budget 2024: How to trade in Nifty 50 option? Rupak De decodes

Trading strategy union budget 2024: The Union Budget 2024 will be a litmus test for the administration, according to market experts, given that this is the first coalition government since 2014, and markets, investors, and all citizens of the country have great expectations.

Aamar Deo Singh, Senior Vice President of Research at Angel One, stated that this budget would most likely be more consumption-focused, with a bigger emphasis on lower-income and rural populations. It is also widely expected that social expenditure in both rural and urban regions would rise, and that lower-income households will receive tax relief. The markets are enthusiastic about curbing inflation while promoting continuing economic growth without jeopardizing capital investment.

On June 4, it was a significant day as the election results were announced. The outcome diverged from the expectations set by exit polls, causing the market (Nifty 50) to initially drop sharply below 21,300. However, the market then experienced a remarkable rally, not only surpassing the previous high of around 23,300 but also reaching levels near 24,500, gaining over 15% from the panic low of June 4. According to analysts, the markets are currently highly overbought, and the budget session will be closely watched.

Investors would be interested to understand about the trading strategy on the day of the Union budget in 2024, which is tomorrow (Tuesday, July 23). Rupak De, Senior Technical Analyst, LKP Securities, discusses trading strategies, important market levels, and the most sensitive sector to watch out for on July 23.

Nifty 50 support levels

Like any major event, Union Budget Day is likely to be highly volatile. There is a high chance that the Nifty 50 might break the recent consolidation range on the day of the budget. It could either give a breakout on the upside or downside, or it might remain highly choppy and break both bands of the range. On the lower end, put writers have significant positions at 24,500 and 24,200, which might act as supports, while resistances are placed at 24,800 and 25,000, where call writers have significant positions, said Rupak.

Trading strategy

On the Union Budget Day active trader might use the volatility to their favour. On the lower end, a decisive fall below 24,500 might take the index towards 24200-24150; again a decisive fall below 24,150 might take the index towards 23800. On the other hand a sustained move above 24,700 might take the index towards 24,800; again above 24,800 it might move towards 25,000, advised De.

Trading opportunities

Traders might take the opportunity to trade the spikes in the index or in select stocks based on the budget announcement. However, trades should be executed with targets and stop losses placed at predefined levels, as the market may remain highly reactive with very short reaction times due to sharp price movements, according to Rupak.

Sectors to watch

Sectors with high expectations generally remain highly volatile on budget day. Any announcement that exceeds expectations tends to react positively, causing stocks in that sector to spike sharply. Conversely, announcements that fall below expectations can trigger knee-jerk reactions due to panic selling by leveraged buyers. Railways, power, housing, infrastructure, renewable energy, and fertilizers are among the sectors that typically experience heightened activity around the budget.

Trading advice

Rupak De believes that no stock-specific advice can be given ahead of the budget; intraday trading on budget day has always proven to be highly risky. Additionally, investing all your money on budget day might prove to be a bad strategy. Therefore, it would be better to wait and watch until the dust settles, and then check the charts to enter short-term trades or long-term investments.

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 decision.