Here’s why Nifty 50, Sensex turned volatile after Budget 2024 speech

Nifty 50 fell 67 points to hit the intraday low of 21,658.75 before ending 28 points, or 0.13 per cent, lower at 21,697.45. The Sensex lost 177 points to hit the intraday low of 71,574.89 but ended 107 points, or 0.15 per cent, lower at 71,645.30.

Mid and smallcaps underperformed the benchmarks. The BSE Midcap index fell 0.40 per cent while the Smallcap index declined 0.22 per cent.

Also Read: Stock market today: Nifty 50, Sensex end lower on Budget Day; PSU banks shine on capex boost

Why did Nifty 50, Sensex turn volatile after Budget 2024 speech?

The Budget largely remained in line with expectations and avoided populist measures ahead of the General Elections. 

Experts underscored that the government showed fiscal prudence in the Budget which is positive for the economy and the stock market. 

Experts also added since it was an Interim Budget, the market did not have high expectations from it. 

Also Read: Budget 2024: Govt pegs fiscal deficit target at 5.1% of GDP for FY25

“The hallmark of this interim Budget is its fiscal rectitude. The fact that the government has prioritised fiscal consolidation over populism on the eve of general elections is commendable,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The fiscal deficit numbers of 5.8 per cent in the revised estimates for FY24 and 5.1 per cent for FY25 are better than the most optimistic expectations. This is very good news for the economy and consequently for the market. The boost to housing is another important proposal from the market perspective since this will benefit industries like cement, steel and all construction-related segments,” said Vijayakumar.

Sonam Srivastava, smallcase manager and founder of Wright Research underscored that the market’s reaction to these announcements has been mixed, with positive movements in the FMCG sector, attributed to measures expected to boost consumer spending power. Conversely, railway stocks saw a decline, possibly due to concerns over the execution and immediate impact of the infrastructure projects announced.

“The muted market response underscores cautious optimism, with investors looking for more clarity on the implementation of budget proposals,” said Srivastava.

Weak global cues after the US Fed outcome also appear to be weighing on market sentiment.

The Fed left the benchmark interest rates unchanged at 5.25 per cent – 5.50 per cent for the fourth straight meeting.

Also Read: US Fed Policy: FOMC keeps key rates steady at 23-year high-mark in first verdict of 2024; no rate cuts seen in March

“While the Budget contained minimal surprises, it reflected the government’s commitment to fiscal prudence and tempered expectations. Unsurprisingly, the market showed a muted reaction, choosing to prioritize upcoming earnings reports and global developments as drivers of stock- and sector-specific outperformance,” said Sunil Nyati, Managing Director of Swastika Investmart.

Technical views on Nifty 50

Ashwin Ramani, derivatives analyst at SAMCO Securities pointed out that the level of 21,800 on the upside & the level of 21,500 level on the downside will be the two key levels for Nifty.

“The Implied Volatility Percentile (IVP) of Nifty is 91 per cent. The Implied Volatility (IV) of Nifty is 15. The current IV of Nifty, which is 15, is in the higher range of historical volatility. It has been seen in the past that volatility rises before the budget and cools off after the budget announcement. Since the IV of Nifty is at the higher range of historical volatility, chances are that volatility can cool off in the coming days. To take advantage of IV crushes, one can go for either credit spread or short strangle/straddle strategies,” said Ramani.

Analysts at the brokerage firm Mehta Equities underscored that the immediate resistance for Nifty is at the 21,840 mark, whereas the immediate support is placed at 21,650.

“Any move below 21,650 should lead to a down-move towards 21,580 and 21,540. Major support continues to be at the 21,500 mark. The overall trend remains positive,” said Mehta Equities.

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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 decisions.

Here’s your comprehensive 3-minute summary of all the things Finance Minister Nirmala Sitharaman said in her Budget speech: Click to download!

Published: 01 Feb 2024, 12:11 PM IST