Nifty, Sensex extend gains as Budget speech begins, PSU bank stocks under pressure

Nifty, Sensex held firm gains as Finance Minister began her Budget 2024 speech

Indian benchmark indices Nifty, Sensex extended gains as Finance Minister Nirmala Sitharaman began her Interim Budget speech at 11 am. Buying in Auto, FMCG and energy names lifted the benchmarks up to half a percent. Losses in pharma, PSU banks and metal stocks capped the gains.

Ahead of key announcements, investors and traders are advised to maintain their positions with prudent risk management, said Mandar Bhojane, Research Analyst, Choice Broking.

At 11:06 am, the Sensex was up 317.83 points or 0.44 percent at 72,070, and the Nifty was up 78.40 points or 0.36 percent at 21,804. About 1,597 shares advanced, 1,532 shares declined, and 79 were unchanged.

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Bank Nifty swung to trade marginally in green. Its gains were capped by losses of up to 1 percent in Bandhan Bank, ICICI Bank and Federal Bank. On the flip side, Nifty Auto surged over 1.5 percent as street expects key announcements for the sector in FM Sitharaman's Budget speech. Nifty FMCG, Nifty Energy and Nifty IT also saw gains of 0.5 to 1 percent.

Fundamental view

"With expectations for the interim Budget to be mainly a vote on account, lacking significant announcements, the index is likely to maintain a narrow range. Traders are advised to stick to their stop-loss strategies and closely monitor price movements for guidance, said Shrey Jain, Founder and CEO SAS Online.

"The play around budget day is usually around stocks that could benefit from favourable announcements, but with the February one being only a vote on account budget, opportunities may be limited. Yet, we are okay with playing the renewable energy theme as well as railway theme via Borosil Renewables and RVNL respectively, despite them having registered substantial gains recently," said Anand James, Chief Market Strategist, Geojit Financial Services.

Given the heightened volatility, it's wise to refrain from specific recommendations. However, analyzing data reveals noteworthy Open Interest at the Nifty's 22,000 Call strike (approximately 74 lakh shares) and substantial interest at the 21,500 Put strikes, around 77 lakh shares, said Shrey Jain, Founder and CEO SAS Online.

Where are Nifty, Bank Nifty headed?

"Nifty has benefitted Reliance and Adani stocks’s surge, helping the index to touch a distance of 21,800, a region that has attracted rejection trades recently. However, we remain positive for continued rise towards 22,190 as long dips are contained above 21,490, but would be forced to consider 20,900, should we slip back below 21,330," said Anand James, Chief Market Strategist, Geojit Financial Services.

Option traders would do well to note that VIX usually rises in the fortnight ahead of budget, with last year seeing a 66 percent rise during the same period, only to see a steep fall in VIX, post-budget, said James. "Though the full year budget is only in July, the rise in VIX from the fortnight’s low is still underway, with a near 30 percent rise so far. Towards this end, we favour short strangles on Nifty," he added.

Also Read | 250 BSE Smallcap index stocks more than doubled since previous budget; will budget 2024 provide fresh triggers?

Bank Nifty now faces the next resistance at 46,500, and a decisive break above this level could potentially reverse the entire trend for the index. "On the downside, the immediate lower-end support is positioned at 45700, and breaching this level may signal a resurgence of bearish control in the market," said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities. Request you to please incorporate the views in your story.

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