{"id":1081,"date":"2022-01-31T17:04:15","date_gmt":"2022-01-31T17:04:15","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=1081"},"modified":"2022-02-02T05:53:11","modified_gmt":"2022-02-02T05:53:11","slug":"trading-strategy-for-the-budget-2022","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/trading-strategy-for-the-budget-2022\/","title":{"rendered":"Trading strategy for the Budget 2022"},"content":{"rendered":"
<\/div>\n

Trading\nrules for the Budget 2022<\/strong><\/p>\n\n\n\n

As our finance minister Nirmala Sitharaman read her fourth budget on 1st February 2022, Investors must stay ready to witness the volatility in the Indian stock market. Amid pandemic since 2019, every sector is trying to cope with the situation and survive and grow. every sector has their expectation from the finance minister and the Government of India. With the finance minister reading out her budget fr the coming year, every person’s eye and ear will be glued o the televisions and internet, to listen to her and what our finance minister has in her kitty forever person living and every business existing in India. However, this is one good time to invest in the market and make use of high volume and volatility in the market.<\/p>\n\n\n\n

\n  \n <\/td>\n Call Option<\/strong>\n <\/td>\n ATM Strike<\/strong>\n <\/td>\n Put Option<\/strong>\n <\/td><\/tr>
\n YEAR\n <\/td>\n 7 days before\n <\/td>\n 1 days before\n <\/td>\n ATM strike on the Budget Day\n <\/td>\n 7 days before\n <\/td>\n 1 days before\n <\/td><\/tr>
\n 2021\n <\/td>\n 230.6\n <\/td>\n 38.4\n <\/td>\n 14300\n <\/td>\n 248.3\n <\/td>\n 657.2\n <\/td><\/tr>
\n 2020\n <\/td>\n 510\n <\/td>\n 22.7\n <\/td>\n 11700\n <\/td>\n 19.9\n <\/td>\n 46.9\n <\/td><\/tr>
\n 2019\n <\/td>\n 150.9\n <\/td>\n 201.4\n <\/td>\n 11800\n <\/td>\n 121.8\n <\/td>\n 37.4\n <\/td><\/tr>
\n Source:icicidrect.com\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
\u00a0 \u00a0<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

To take our stand on the budget day. Let’s see how has options performed in the last three budgets. <\/p>\n\n\n\n

Considering the at\nthe money strike last 3 budget, pre-budget implied volatility gain before due\nto uncertainty and as the budget is over the implied volatility shrinks on the\nside against which the market is moving.<\/p>\n\n\n\n

Handle\nthe risk on the budget day<\/strong><\/p>\n\n\n\n

Whether prices move\nup or down, straddles and strangles are two strategies, that will help an\ninvestor to benefit.<\/p>\n\n\n\n

A long straddle is\na strategy where an investor purchases both a long call and a long put on the\nsame underlying and same strike price.<\/p>\n\n\n\n

A long strangle is\na strategy where an investor has one long call with a higher strike price and\none long put with a lower strike.<\/p>\n\n\n\n

The only risk in\nboth the strategy is the premium paid. So, we can mitigate the risk by using\nany of these strategies but can’t reduce the risk to zer0.<\/p>\n\n\n\n

Nifty and Bank nifty are two indexes, that are highly volatile on the day of the budget. Taking advantage of this volatility is what every investor seeks, however, it is important to know that high volatility means high risk. Thus investors must be cautious before entering into any kind of options trading or intraday trading.<\/p>\n\n\n\n

Year<\/strong><\/td>Dates<\/strong><\/td>Nifty<\/strong><\/td>Budget Day<\/strong><\/td>Bank Nifty<\/strong><\/td>Budget Day<\/strong><\/td><\/tr>
2012<\/td>16-Mar-12<\/td>5318<\/td>-1.2<\/td>10391<\/td>-1.9<\/td><\/tr>
2013<\/td>28-Feb-13<\/td>5693<\/td>-1.8<\/td>11487<\/td>-3.7<\/td><\/tr>
2014<\/td>17-Feb-14<\/td>6073<\/td>0.4<\/td>10327<\/td>1.2<\/td><\/tr>
2014<\/td>10-Jul-14<\/td>7568<\/td>-0.2<\/td>14822<\/td>-0.7<\/td><\/tr>
2015<\/td>28-Feb-15<\/td>8902<\/td>0.6<\/td>19691<\/td>3.2<\/td><\/tr>
2016<\/td>01-Feb-16<\/td>7556<\/td>-0.1<\/td>15314<\/td>-1.3<\/td><\/tr>
2017<\/td>01-Feb-17<\/td>8716<\/td>1.8<\/td>20021<\/td>2.6<\/td><\/tr>
2018<\/td>01-Feb-18<\/td>11017<\/td>-0.1<\/td>27221<\/td>-0.6<\/td><\/tr>
2019<\/td>01-Feb-19<\/td>10894<\/td>0.6<\/td>27086<\/td>-0.8<\/td><\/tr>
2019<\/td>05-Jul-19<\/td>11811<\/td>-1.1<\/td>31476<\/td>0<\/td><\/tr>
2020<\/td>01-Feb-20<\/td>11662<\/td>-2.5<\/td>29821<\/td>-3.3<\/td><\/tr>
2021<\/td>01-Feb-21<\/td>14281<\/td>4.7<\/td>33089<\/td>8.3<\/td><\/tr>
Source:livemint<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
   <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Performance of Nifty and Bank Nifty in last 10 years on the Budget Day <\/p>\n\n\n\n

Taking cues from the previous performance, we can\ndespite higher volatility, nifty and bank nifty did close marginally high or\neven some time in negative, it was only last year, i.e in the year 2021, Nifty\nand Bank Nifty both took the leap of 4.7% and 8.3%, respectively. 2022, could\nreplicate the year 2021, thus investors must stay prepared with their trading\nstrategies to not miss the market momentum.<\/p>\n\n\n\n

NIFTY\nOUTLOOK<\/strong><\/p>\n\n\n\n

Nifty has been the week with the bank gaining almost\n237.9 points from the last week’s close of 17101.95. formation in the chart\nindicates strength in nifty for the short to medium term. If budget euphoria\ntakes nifty across 17400, and any it sustains the level, then we can see,\nbuying in nifty and it may regain the level of 18000. The level of 17400 and\n16800 are two crucial points of Nifty any swing towards any of these levels may\ntake the index in their respective side.<\/p>\n\n\n\n

BANK\nNIFTY OUTLOOK<\/strong><\/p>\n\n\n\n

Bank Nifty settled the first week on the day in red however, it gained almost 286 points from last week’s close of 37689.40. The index is indecisive on the weekly chart, however looking at the daily chart, it is making higher tops and higher bottom formations, indicating a surge in the index. Amid some budget support from the government of India, might take the Bank nifty on the upside and if it manages to cross the 38000 mark and sustains the level, then we can see ore buying in the index.<\/p>\n\n\n\n

Index <\/strong><\/td> Resistance 1 <\/strong><\/td> Resistance 2 <\/strong><\/td> Support 1 <\/strong><\/td> Support 2 <\/strong><\/td><\/tr>
\n Nifty\n <\/td>\n 17600\n <\/td>\n 18000\n <\/td>\n 16800\n <\/td>\n 16400\n <\/td><\/tr>
\n Bank Nifty\n <\/td>\n 38600\n <\/td>\n 39200\n <\/td>\n 36300\n <\/td>\n 36000\n <\/td><\/tr>
\n Invest19.com\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
\u00a0 \u00a0<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

However, any fall in the bank nifty can be ignored till crosses the level of 37000 mark, any fall below this level with strength may take the index towards 36300. <\/p>\n\n\n\n

Sectors in focus<\/strong><\/p>\n\n\n\n

Healthcare Sector<\/strong><\/p>\n\n\n\n

Covid had a huge impact on the entire Life Sciences and\nHealth Care (LSHC) industry. <\/p>\n\n\n\n

Nifty Pharma has opened the week with a surge in the\nindex by 332 points from the last weekly close of 12983.50. The strength in\nNifty pharma will continue amid any relief from the budget given to the sector,\nNifty pharma may touch the 13394 and any sustainable movement above the level\nwill push the nifty pharma to 13628.<\/p>\n\n\n\n

IT sector<\/strong><\/p>\n\n\n\n

IT sector has become key to the development of Indian\neconomy.  Many Indian It companies have\nmade it to the list of most valuable IT companies across the world.<\/p>\n\n\n\n

Nifty It after prolonged weakness since last 7 trading\ndays, managed to open the week with strength. Nifty IT has crossed its first\nmajor resistance of 34473 and sustainabletrading above this level will take the\nindex toward 35065.80.<\/p>\n\n\n\n

STOCKS IN FOCUS<\/strong><\/p>\n\n\n\n

State Bank of India:<\/strong><\/p>\n\n\n\n

State\nBank of India is nearing its first resistance level of 543.90 and positive\nreform for the banking sector will affect the entire banking sector SBI being\nthe largest bank in the country will certainly react to the budget and the\nprice may go up to 543.90.<\/p>\n\n\n\n

ICICI Bank:<\/strong><\/p>\n\n\n\n

The\nlargest private sector Bank will see high volatility, as it is trading at\n788.80 near its first resistance level of 797, thus if the bank gains momentum\nand manages to touch the level of 797 with strength then we can see prices\nmoving to 805.<\/p>\n\n\n\n

Tata Consultancy Services:<\/strong><\/p>\n\n\n\n

TCS\nhas made it to the list of most valuable IT companies in the world and the same\nhas impacted the prices of the TCS and has touched the high of 3758, crossing\nits first resistance level. Any supportive package to the IT sector will\nprovide further support to the share prices and it may touch the level of\n3775.15.<\/p>\n\n\n\n

No\nrisk no gain, however taking calculative risk is a must. An investor must do\ntheir homework, before taking their position on the budget day, as the market\nwill be subject to high volatility, thus high risk,  depending on the kind of budget tabled. <\/p>\n

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\n \n <\/i>\n <\/a>\n 1 <\/span>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":"

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