The stock market will be open for trading on February 1 in light of the Union Budget 2025. After experiencing sharp declines in recent months, the markets are showing signs of optimism as a recovery is underway ahead of the budget announcement.
Market Sentiment and Sectoral Outlook
Stock market analysts have indicated that the budget is likely to focus on welfare measures, agriculture, infrastructure development, and further support for manufacturing under the Production Linked Incentive (PLI) scheme.
Sectors such as agriculture, agrochemicals, infrastructure, and capital goods are expected to benefit from the upcoming budget. Srivastava also mentioned that renewable energy and healthcare could receive attention as part of broader structural reforms.
Managing Stock Market Risk and Investment Strategy
While the budget may offer growth opportunities, stock market experts caution that such announcements often lead to increased volatility due to speculation and market reactions. To mitigate this risk, she suggested that investors maintain a balanced portfolio, including diversified equities, debt instruments, and gold.
In addition to market expert insights, historical trends on budget day suggest that trading can be volatile. Sujit Modi, Chief Investment Officer of Share. Market, pointed out that in 12 out of the last 14 budget events, the Nifty 50 index has experienced intraday swings within a 2-3% range.
Budget Day Strategies for Traders
Given the pattern of market behavior, Modi suggested that traders may benefit more from volatility-based strategies rather than directional strategies. Implied volatility strategies, which capitalize on the expected volatility crush post-budget, can be particularly profitable.
Backtesting has shown that strategies like the Short Iron Fly and Short Iron Condor have yielded consistent gains in 13 out of 14 instances.
The Short Iron Fly strategy involves selling an at-the-money straddle and buying out-of-the-money options as protection, which creates a defined-risk position benefiting from declining volatility. The Short Iron Condor follows a similar structure, but with wider strike differences, allowing for a larger range of profitability while still limiting potential losses.
Also Read: Budget 2025: Stocks to Track as the Finance Minister Speaks
