Budget 2025: Kapil Shah of Emkay Global reveals trading strategy, sectors, stocks to watch out for on February 1 | Stock Market News

Budget 2025: Dalal Street is off to a challenging beginning in 2025, with Nifty 50 experiencing a decline of 2.63% as of January 25, according to analysts. Experts advise investors to exercise caution due to the potential for sudden market downturns. With just one day left until the Union Budget 2025 is revealed, market experts anticipate a range of changes, including reforms in income tax, an emphasis on agriculture, and a balancing act between fiscal responsibility and economic advancement.

Nirmala Sitharaman, the Finance Minister of India, is set to deliver the Union Budget for FY25-26 on February 1, 2025. The influence of the Union Budget on the stock market has diminished significantly in recent years, as the government has implemented many reforms outside the Budget framework.

However, according to reports, the market this time is anticipating an ongoing momentum for economic reforms that have propelled India to become the fastest-growing major economy worldwide.

Market analysts suggest that India’s FY25 budget is expected to lay the groundwork for positioning India as a strong competitor to China’s supremacy in global supply chains and will provide an important insight into the government’s priorities and fiscal plans.

Attention will be focused on the finance minister’s initiatives aimed at ensuring fiscal stability, promoting inclusive development, investing in infrastructure, supporting green growth, and implementing strategic tax changes.

On the technical front, Kapil Shah, Technical Analyst, Emkay Global, and Technical Analysis Trainer at Finlearn Academy, discusses trading strategies, crucial market levels, the sectors and stocks to be on the lookout for toward the weekend.

Union Budget 2025: Key levels to watch out

According to Kapil Shah, on the day the Union budget the critical market levels for Nifty 50, Sensex, and Bank Nifty are as follows:

Nifty 50

Resistance: 23,150/23,400
Support: 22,800/22,500

Sensex

Resistance: 76,900/77,850
Support: 75,230/74,300

Bank Nifty

Resistance: 49,700/50,700
Support: 48,000/46,500

Union Budget 2025: Nifty 50 support levels to watch out

On Higher side Index has resistance at 23,400 and on downside Index has support in the range of 22,800 to 22,500, according to Shah.

Union Budget 2025: Trading opportunities

Kapil Shah believes that the themes like Infrastructure, Cement and Healthcare and Insurance will be key segments to identify trade opportunities. In case of relief in taxation, Consumer Discretionary can be in focus.

Union Budget 2025: Sectors to watch out

FMCG has been the most consistently positive performing sector, with positive returns in 11 out of 13 budget sessions. Real Estate sector demonstrated the highest average returns at 1.3%. However, it also showed considerable volatility, with some significant swings both positive (6.3% in Feb 2021) as well as negative.

Union Budget 2025: Trading advice for investors

According to Shah, trading on Union Budget day can be highly volatile due to uncertainty and sudden market reactions to announcements. Here are some key strategies for traders and investors:

For Traders (Short-term Perspective)

⦁ Avoid Large Positions Before the Budget

⦁ Market sentiment can change rapidly based on budget announcements, so avoid taking aggressive positions before the speech.

⦁ Use Options to Hedge Volatility

⦁ Consider straddle or strangle strategies (buying both Call and Put options) to take advantage of large price swings.

⦁ Infrastructure, Banking, FMCG, Auto, and PSU Stocks tend to react sharply to budget policies.

⦁ Watch for any tax changes, government spending, or policy reforms impacting these sectors.

⦁ Watch for Post-Budget Trends

⦁ The market’s initial reaction may be misleading. The real trend emerges after investors analyze details.

⦁ Avoid trading in the first hour and wait for a clearer trend to develop.

For Investors (Long-term Perspective)

⦁ Avoid Panic Selling or Buying

⦁ Short-term volatility does not always reflect the long-term impact of budget decisions.

⦁ Focus on fundamentals rather than reacting impulsively to price movements.

⦁ Look for Value Opportunities

⦁ If quality stocks decline due to temporary market reactions, it might be a good buying opportunity.

⦁ Monitor Fiscal Deficit and CapEx Announcements

⦁ High government spending on infrastructure and manufacturing can boost related stocks.

⦁ A well-diversified portfolio reduces the risk of policy-specific shocks.

Budget Day: returns on the day of the budget

➢ Consistency in FMCG Sector Performance:

– FMCG has been the most consistently positive performing sector, with positive returns in 11 out of 13 budget sessions

– The sector maintained relatively stable performance with an average return of 1.0%

➢ Real Estate Sector Shows Highest Average Returns:

– Real Estate sector demonstrated the highest average returns at 1.3%

– However, it also showed considerable volatility, with some significant swings both positive (6.3% in Feb 2021) as well as negative

➢ Strongest Budget Impact:

– The February 2021 budget saw the most positive market reaction across sectors

– NIFTY gained 4.7%, while Banking sector led with 8.3% returns

– Most sectors showed strong positive performance during this session

➢ Recent Trends (2023-2024):

– The last two budgets (2023 and 2024) showed relatively muted market reactions

– Most sectors showed modest movements compared to historical patterns

– PSU Banks showed notable strength in the 2024 budget with 3.1% returns

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.