Below is a verbatim transcript of the interview:
Q: How is the market approaching the Budget in terms of positions, and what could be the likely market movement if the Budget disappoints or if it turns out to be a good one?
A: Mostly, the Budget is going to be a policy statement and most of the minor steps that the government had to take to convince the market about their reform process have already been taken. These are in terms of opening up foreign direct investments (FDIs) in segments like retail and aviation, deregulating diesel prices and increasing them twice in a row.
The market is driven mostly by fundamentals of economy rather than the Budget. However, we are very closely watching how the finance minister (FM) would be financing the fiscal deficit, how it will reduce the subsidy burden of the economy and how that reduction will be compensated? Otherwise, there would be a direct impact on consumption. So, these are a couple of things we would be closely watching.
Q: Our concern is just over the next 24 hours. Is the market going into the Budget somewhat light because tomorrow is also expiry day. That is perhaps a kind of a dangerous and volatile combination. What is your advise for those who are still looking for positions ahead of the Budget?
A: I would say it is very lucky and fortunate to have expiry day on the event day. Instead of taking a directional bet and getting hit by unwarranted moves in the futures of stock price movement, one can express the view by buying Calls or Puts being bullish or bearish. You might just end up paying 1-1.5 percent premium because it is the last day.
So that is a boon in my view and we have seen implied volatilities (IVs) of Nifty and various stocks have not fallen in spite of it being just a day before of expiry.
All said and done, I would say mostly whatever negative was expected in the Budget have already been discounted in the prices prevailing in the market. We can see how the midcaps have fallen, not even the not-so-good stocks but even quality stocks have pared their 20 percent kind of a gain from the peak, largecaps have pared about 10-15 percent from their peak. So, the market is entering into those safety zones where investors can look at buying incrementally at any fall.
I do not think even if Budget is sentimentally negative, the market will crash big time.
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