Budget 2025: How to craft a winning trading strategy for Budget day – 4 experts advice how

Budget 2025 Trading Strategy: The Union Budget has consistently driven trends in the Indian market. The upcoming Union Budget for the financial year 2024-25 is expected to prioritise capital expenditure, emphasise manufacturing growth, and ensure macroeconomic stability. Historically, Union Budget announcements significantly influence the stock market, shaping sector trends based on government policies and financial plans.

The Union Budget for FY 2024-25, to be presented by Finance Minister Nirmala Sitharaman on February 1, 2024, at 11 am.

To help traders navigate the market volatility surrounding Budget Day, experts weigh in with strategies designed to maximize opportunities while minimizing risks.

This article compiles insights from market experts on how to navigate the turbulence of budget day trading.

1. Shrikant Chouhan, Head of Equity Research, Kotak Securities

Chouhan recommends a cautious approach given the uncertain global environment. He suggests a directional call strategy to limit risk, especially in the days leading up to the budget. Traders could consider purchasing out-of-the-money call options around January 20 to position themselves for potential market movements.

2. Akshat Garg, AVP, Choice Wealth

Garg advises traders to stay prepared for market corrections, which often accompany budget announcements. Maintaining a portion of the portfolio in cash is crucial to capitalize on sharp dips in high-quality stocks. He emphasizes avoiding speculative trades and focusing on fundamentally strong companies likely to recover quickly post-budget volatility.

3. Atul Parakh, CEO, Bigul

Parakh suggests aligning strategies with sectors expected to benefit from the budget, such as infrastructure, healthcare, and agriculture. He stresses the importance of risk management tools like stop-loss orders to safeguard against unexpected price fluctuations, ensuring that traders remain protected in volatile market conditions.

4. Sujit Modi, CIO, Share.Market

Modi highlights the historical trends of market volatility during Budget Day. Over the past 14 years, the Nifty 50 has experienced intraday movements of 2-3 percent on 12 occasions. India’s VIX index, which measures market volatility, often rises leading up to Budget Day and drops during the announcements.

Modi recommends focusing on implied volatility (vega) strategies rather than directional trades. After backtesting various strategies, he found that Short Iron Fly and Short Iron Condor consistently delivered profits in 13 out of 14 instances.

Short Iron Fly Strategy Results:

Maximum profit per lot: ₹1,700 in 2018

Maximum loss per lot: ₹5,300 in 2021 (outlier year with a 4.74 percent Nifty movement)

Short Iron Condor Strategy Results:

Maximum profit per lot: ₹650 in 2022

Maximum loss per lot: ₹3,050 in 2021

Both strategies provided protection through strategically placed hedges on out-of-the-money positions, limiting losses during extreme market movements.

In summary, Budget Day trading requires a blend of caution, preparation, and informed decision-making. Whether adopting directional strategies, traders should focus on managing risk and aligning with historical trends. With careful planning, Budget Day volatility can present lucrative opportunities for savvy investors.

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.