Stock market traders are accustomed to wild swings in share prices on the day of the Union Budget. That is mainly due to the huge build-up of speculative positions usually purchases in the run-up to the event. But this time, investors and traders may be spared some of the gut-wrenching fluctuations as traders have kept their outstanding commitments to the minimum, after having been repeatedly caught on the wrong foot over the past few months.
There is no heavy built-up in the market this time ahead of the big event, says Ravi Sharma, derivatives analyst, Prabhudas Lilladher. Unlike earlier years, volatility has been going down for the past few weeks. We are not expecting any major movement in the major indices apart from the initial volatility, he said.
Mr Sharma sees 4800 as a strong support for the Nifty index and 4950 as the immediate resistance level. In the past 21 budgets since 1991, the market has shown a mixed trend on Budget day. However, they have seen a steep fall in the past three years on the Budget day.
There could be some initial volatility this time too, but investors need not take their decisions based on market movement on a given day.
The best strategy is to hold on to your investments if you think the company is fundamentally strong, Mr Sharma adds. Brokers also say that the significance of the Budget has been waning as far as its impact on the market is concerned. That is because many important decisions are now being announced outside the Budget.
The concern is more to do with the increasing volatility in the global markets and lack of clear direction. Investors should not panic with the initial swings, says head of research of a Mumbai-based brokerage. However, the numbers may vary if one were to take a sector or stock-specific approach as segments like fertilisers and auto are impacted significantly by Budget proposals. Long-term investors should not churn their portfolio merely on the basis of any reaction of the markets based on the Budget, he adds.
Experts say that there are no major pressures on the government to appease any section of the voters as there is some time to go for the elections. They also say that the expectations of market participants from the Budget are low, and they are more keen to see how the government will manage its fiscal deficit.
According to analysts, the government is expected to push through financial reforms, including a roadmap for goods and services tax, apart from bridging the fiscal deficit. Analysts believe that the widening deficit may force the government to withdraw sectoral sops and stimulus packages.