Budget day is here and we are trading on a Saturday and this probably is the first-ever Saturday where we are trading full till 3.30 PM.
Looking around its not a great time to talk budget, as there is a global scare of virus and there is a talk of a supply slack and yesterday we had a horrible session where after crossing 12050 and looking like going to 12100, Nifty suddenly took a U-turn and broke 12000 mark convincingly and closed at 11962 mark. This brings us to 11946 mark that Nifty closed on before the budget day.
On the budget day, it lost 135 points and closed around 11800 mark and that fall had taken 10800 in one month, a 10% correction. Are we on that path of correction or are we going to have a post-budget rally is something that we need to see.
Coming to domestics, its a budget day today and you would have seen a lot of expectations from the budget that is written everywhere and I will not bother you with those details. Coming to the point, the biggest worry for me is the growth and if we look at the GDP, it’s showing no signs of growth.
On top of it, the fiscal deficit which was projected to be around 3.3% of GDP could end up anywhere between 3.6 to 3.8% this fiscal. If that happens it’s a huge negative and Govt has to find a balance between spending and creating demand, balancing that with taxes and in my view is the biggest challenge in front of FM today. Tax growth which was projected to be around 20% this year has ended up around 8% and this will surely dent the revenue for Govt and how it will steer through all this and give growth is what I will be looking forward to in today’s budget.
On the derivatives front, the worst days we have seen in July when the 1st budget of Nirmala Sitharaman was presented is back again. There is a huge amount of FII selling amounting to 4000 plus crore and Nifty futures long positions for February series stand at a mere 15%. This means 85% of people are on the short side going into the budget.
The options market also saw a lot of bearishness and the Nifty put-call ratio is now back below 1 at 0.97. 12100 call added 9.6 lakh positions while 12200, 12000 and 12300 calls added 8.8, 8.5 and 8.3 lakh positions indicating that there would be huge volatility on both sides. But the surprise is 8.7 lakh positions getting added at 12500 call indicating ultra bullishness. On the put side, 11800 put added 5.5 lakh positions indicating that we might go there if the budget is bad.
What is the Nifty call for the day?
Today is the budget day special trade and probably this is the first time ever that Indian stock market is having a full day trade on a Saturday. This is coming on a worst possible situation where US markets were down 600 points last night on the fear of Coronavirus. But other global markets are shut today and only we are trading so, its the budget that will define the market.
We will open at 11900 mark today and till the budget time of 11 AM market will be flat and after that, it is completely what FM says will define the path. Budget is likely to get over by 1 PM and then Nifty will have another two and a half hours to react to what FM says. So, the trade for the day will be totally based on what Nirmala Sitharaman says in her budget.