If you are a trader, if you trade, then how can you trade one budget day. How can you take advantage of the pre-budget rally and how can you take advantage of the post-budget rallies?
So whatever we are going to tell you, we will explain your specific things that you can understand by looking at the data that what can happen and according to that you can be prepared in advance and today I have one and only Mr. Apoorv.
Hi good morning sir good morning and we are very excited that you have done so much preparation that I would like to tell you that the data you are seeing, this data has been researched and taken out by us, means the whole night they have put it for you to get the data and to tell you the important information that you have to share.
So sir we can start now. Absolutely, so as we are seeing, from 2010 to now, all the budgets that have come, a total of 15 budgets have been announced, two interim budgets have also been included so 13 full budgets and 2 interim budgets, how has the market performed in these 15 budgets? So in this blog, we will see that Nifty 50, Bank Nifty, Fin Nifty and India Wix, these 4 important tools or we can say indexes, how have the indexes performed? Right.
Along with this, we will see what has happened on the day of the budget, how much volatility remains on the day of the budget and what happens a week before the budget, a week after the budget, a month before, a month after, in all these indexes. So we will see all these things and according to this, we will design a strategy which can be useful for you in this budget.
Let me tell you that this budget will be the last full budget of the government before they go into elections. So generally we see that in the pre-election year, there is Avery good movement in Nifty50, so on the day of the budget, the expectations will be very high that the government will make very good announcements which will help the market.
So does this really happen and if this happens, how can you take benefit from it? We will see all these things. So I am very excited, as sir said that he has spent the whole night to get this data, so even I am excited to share and see what all things we have for our viewers. Absolutely sir.
So first of all, we see what changes are made on the day of the budget. So on an average, what is the change that we see in Nifty 50, so 0.26% average changes visible, but this is the average, so the average of 15 years is looking like a big flat, but if you see the daily change, so here sir wants to tell specifically, people expect that there will be a big movement on the day of the budget, so here the percentage of change is there, means from the closing of the last day, the closing of the day of the budget was 0.26%, it means that people will think that there is no big change, but wait, the picture is still there.
So I want to take an example here, the day of February 2021, that was the best performing day for the markets on any budget day in the last 13 years, soon this day, you can see that 4.74% Nifty was there. In one day. In one day, so that was a very good move that we had seen on that budget day, so that was the maximum move that we had seen and in the 2020 budget, 2.5%Nifty had fallen, so this was one very large move on the downside.
Now, as we talked about the average change, which is 0.26%, but the special thing that we have to pay attention to here is that the whole day’s volatility is very high, so the average volatility is 2.65%, so we have taken out the range of the day, which is 2.65%, which means that if you are an intraday trader, then you get very large range to trade-in Nifty. So this means that the range of high to low is 2.65%, which Is a very good range, if Nifty or Bank Nifty runs, then they can be very volatile.
So now what we have done after this is that the backward returns, that is, how much Nifty runs before the budget day, we have seen this, so that thing is minus 0.5%, that is, if we talk about the pre-budget rally, but on an average, the pre-budget rally does not come down, because we are seeing that there are very big negative moves that are reducing the average.
After this, the forward returns are on an average 1.36%, that is, the market generally falls before the budget and after the budget comes, it goes up. Average.
On an if you see the instances, then you will see a lot of bullish or positive instances where generally the forward returns have been bullish. Right. Right from history. So I am able to understand this data specifically, this is the data of Nifty 50. So you have written the movements of Nifty 50, in this we have understood the things here.
The first thing is that the change that we understood that the average change is 0.26%. If you talk about day volatility here, then the volatility is2.65% and generally what is seen is that the market corrects a little before the budget comes and after the budget comes, the sentiments are bullish, which we have seen on an average.
So sir, this data was of Nifty, similarly you have the data of Bank Nifty. Yes, of course. Please show sir. As soon as I click here, I get the option to select Bank Nifty and this is the data of Bank Nifty. So in Bank Nifty, we generally see that the average returns on the day of Budget Daycare a little more than Nifty. So 0.6% is the average return for Bank Nifty. This is the change of Budget Day. This is the change of Budget Day.
From previous day to Budget Day is closed. Generally, we can say that it is good for banks and it has appositive effect in Bank Nifty. Generally, it is a positive impact. If you look at the big instances, then most of the positive ones will be found. As I can see, in 2021, it was 8% move, but in 2020, it was 3%broken.
Again, it is aggressive, but the average of 15 budgets is 0.60%. Means if the budget is good, then a big move can be expected, especially in Bank Nifty. And the whole day’s volatility is 3.83%. So a lot more volatility than Nifty, the range in Bank Nifty is very big. So it can be a very good opportunity for traders to trade in Bank Nifty.
Here, the backward return is again minus 0.17% and after the budget, the market is rallying. We can see the average. So what is understood so far is that the market is a little bit correct before the budget. It is consolidated and there is a very good range of the day of the budget. On the average and budget day, both Nifty and Bank Nifty are bullish and after that you can see a post-budget rally.
Now here comes another important thing, we have discussed Nifty and Bank Nifty. If you have data of Fin Nifty, then show that too. Because there are many people who trade in Fin Nifty. Fin Nifty was launched in 2011, but trading in derivatives was not in Fin Nifty since 2011.It is a matter of 1-8 years ago, but it is very important to see the past historical data. What is happening in Fin Nifty? So on an average, the change of the budget day is 0.66%. The volatility of the day is 3.26%.
And the backward return is almost flat, minus 0.02%. It means there is no big rise and fall, but the forward returns 1.77%. It means that you can see a post-rally in this too. You people can understand by looking at the data. What happens with data is that history repeats itself? So if you can understand that on the day of the budget, the markets highly volatile. Before that, we can see that the market is consolidating, there are no special returns, pre-budget. But post-budget, it could be, we can say by looking at the data, you can expect a post-budget rally afterwards.
So I will tell you the reason why this happens. So the budget that is going to come, there is uncertainty in the market. So many traders don’t want to take big bets. And what happens in the market is that everyone is waiting for what will come in the budget. So that’s why you see negative returns or flat returns.
And after the budget comes, if there is something negative in the budget, then that fall will come on the day of the budget. So if there is a major fall, then the next 5-6 weeks’ move is generally positive. So if positive news has come, then it is good for the market. So the market will go up.
And if it is negative, then it comes on the day of the budget. Why does it recover? It recovers. So both ways, when the budget comes in the market, when an event comes out, after that, generally an upside comes. Even if there are some negatives in the market. So it was understood that if it falls, then there is a kind of recovery from there. And if there is a good sentiment, then it will continue from there.
So now the special thing here is that India Wix is talking. Because for an options trader, volatility is very important. So what is the scene of volatility? What happens in volatility on the budget day? And what happens in this? The data, I was also surprised that if we look at the data of IndiaVix, then IndiaVix has been falling consistently on also this is a very shocking thing. When I was also looking at budget days.
So from 2011 to now, every year IndiaVix has been falling. Soothe average daily change of IndiaVix on budget day is minus 9%. I will change the data above. So minus 9% is the average change in IndiaVix. Means volatility is falling.
And volatility falls by 9%. This means that the premium of options will also fall. Their price will fall on budget day. So what I am understanding is that if volatility falls, then the premium of options will also decrease. So what do you suggest to the option traders, what should they do on the budget day, should they focus on the buying side or the selling side?
So on the day of the budget, if you want to make a position in the morning or a day before, then obviously the buying side is looking better. But you cannot carry those positions after the market ends because volatility is ending. So you have to see that if the market is going up, then you can hold on to your long call positions and continue and see that if the market is rallying, then you take its benefit. But if the market falls significantly, then the premiums of your options will also fall a lot.
So you will not be able to make money on it’s here I prefer that I avoid selling at this time, at the time of the event. So I suggest people that you can avoid selling because there is high volatility. There is a risk that you may lose.
And if volatility falls for any reason, then if volatility falls, then the IV will decrease and if the IV decreases, then the options will become cheaper. So if your direction is right, then you can make money in the buy. So this is my opinion, what do you think? So if the direction is right, then as you can see that the forward returns are generally positive in all three indexes.
So if you have got the direction right, then you can carry it and move on. So now I will show you this thing on charts that how Nifty and Bank Nifty have been moving on the day of the budget. So we start from February 2022, which was the last year, we see that the change of the budget day was 1.37%. So let’s see how it is seen in the charts on Nifty.
So this is the budget day’s change, this is the budget day’s candle of 1stFebruary 2022.So you can see that the body of the budget day is very narrow, but the whole range is very long and goes down and then goes up again. Means it went down earlier. So it went up, then came down again, then went up again and closed. So the range of the day was very big.
So this is the thing of 2022. But the best candle if we say from bull’s perspective, so it was of 2021, February 2021, we saw that about 4.74% Nifty was closed above. So this is the specific candle, I will zoom in and show you how very good candle was and after that the market went up a lot. So you can see that it is a long day candle, so it is a big green candle, there was a continuous fall of 5 days in the market and after that we saw a rally in the market.
So as we saw that on an average the market falls before the budget and increases after the budget. So this practically happened in 2021 that the market has fallen for 5 consecutive days and then after that a good rally has come. Means if the market is falling, what can be the reasons for that? Either people are expecting that the budget will not come good.
So could be anything, budget will not come good or the demand supply scenarios at that time, the environment at that time, may be because of that the market comes down. But the budget is an uncertainty event, many times it happens that it is just a one-day event and after that the market trend starts to move on its own. But on the budget day you get a lot of volatility. So now thesis the talk of 2 positive candles.
Now let’s talk about February2020 where Nifty gave negative returns. So we saw in our data that it was the biggest negative fall in Nifty. So let’s see how it looks on the charts. So this big red candle you are seeing is the budget day of February2020. And the special thing about this day is that the budget was announced on Saturday, 1st February comes on Saturday.
And this happens very rarely in the history of Indian stock market that the market is open on Saturday. Until and unless there is a Diwali or Lakshmi Pooja session, apart from that I think the market was never open on Saturday in the history of Indian stock market. But this was one day when the markets were open on Saturday Andon that day you can see that 2.5% Nifty fell. So the market was in a negative trend before the budget and the budget came down but still in the next 5 days the market recovered.
And we were in the Coved phase so the market was already in a bearish engulfing candle and then the fall came and then again the recovery came and then again we went down. And from this top the market fell by 40% but still there was a spike in the middle.
So one thing that I am seeing very specifically is that after the budget there is generally a bullish trend. If we talk about that specific week then if you catch the trend right, then you can make good money. Means we remove the pre-budget and also remove the budget if you want to avoid volatility a little bit.
But if you catch the right trend afterwards, until you don’t see the scenario of trend change, you can carry your position. So what the safe traders can do is that you don’t do anything on the day of the budget. After the budget, whatever has to happening the market, the market’s movement comes. So the announcement of the budget starts at 11 o’clock and ends at 1-8 o’clock. So after that the market has a good time to decide whatever it wants to do.
So if you feel that this trend is reversing around 3.5 or 3.5, then you can use your own technical analysis tools, charts etc. If you feel that the bottom can be formed from here, then according to the historical data we are seeing, we have seen that the rally comes on an average in all the indexes, Nifty, Bank Nifty, Fin Nifty.
Now there is one thing to show you that even after that scandal, the next scandal has gone up and down. So many people can be afraid that a rally is expected, but when the market opened, in fact the gap down opened. So from there it has also started recovering. So you have to do your own analysis before you take any decision of trading. It is not necessary that you have to close your eyes and invest money that after the budget the market will go up.
So you will have to take your own decisions. You also apply stop losses. And as we are seeing here that people might have got scared that the market went down and then came up. But on the next day you can see that the market opened a gap up and then open and low, these two were almost the same. This is a different level scenario when you get open and lowing the first candle itself. So you can understand that buyers are aggressive.
So the opening of this particular candle or you can say that the opening period of 15-20 minutes, so after 9.30-9.15, you can take a calculated risk that my stop loss will be this recent low and after that I can try and ride the uptrend which we generally see. So I hope you have got a lot of clarity. Here the professor is the head of research in Samco and I would like to show you the platform of Samco. The platform of Samco is very interactive.
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