Budget Day is special not for just the economists, but also for traders, as any announcement can move markets. Volatility is expected and trading volumes usually rise. If the market moves one way and you have taken a favourable position, you can make big gains or vice versa.
Ankush Bajaj, a trader from Raipur, Chhattisgarh, shares his experience trading on Budget Day. Edited excerpts:
From your experience, how difficult is it to trade on a Budget Day? What kind of challenges do you face?
The Union Budget has always been a major event for the Indian financial markets. Budget day is usually synonymous with market volatility. The market generally remains turbulent before and after Budget day as well.
Traders face major challenges while the Budget speech is in progress. They can expect a swift up movement or a fast fall. One bit of good news can see the markets jump 30-50 points and one bit of bad news can take it down 50-100 points. The direction of the markets on budget day cannot be predicted even by the experts. As the markets move very quickly, trading gets harder.
How do you manage volatility in Budget Day trading?
An experienced trader always loves volatility. When benchmark indices like the Nifty or stocks swing at extreme ends, traders make huge profits and losses. As the budget is announced on Wednesday(one day before expiry), we expect volatility to remain elevated with a sharp move on either side.
What are the mistakes you have made in Budget day trades in the past? What did you learn?
It was 2013. The pre-budget market was in a downtrend and I held heavy positions when the range was more than 3 percent. The price opened at a high. After the budget speech, the price cracked and wiped off more than 10 percent of capital on that day.
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-Don't carry heavy positions ahead of any big event.
-You have to tailor your view according to market circumstances and accept losses.
-Keep in mind your risk tolerance and willingness to take on damage
How has your performance been on the last 5-10 Budget days? Which year was the best and which was worst?
From the last six years we shifted to algo-based systems as we have multiple strategies that we run, like mean reverting, trend following and non directional option selling. So, the worst had been 2013, as I mentioned earlier. We held heavy positions, the market opened at a high and the major chunk of our capital was wiped out.
The best followed it. In 2020, we had become wiser and we took smaller positions thereafter.
What will be your advice to first-time traders on Budget day?
Most conservative traders do not choose to trade on budget day, but there are many traders who wait for this day to take a plunge. Beginners and newcomers have to avoid trading on budget day because there is a lot of volatility and uncertainty about the direction of the market. Throughout the trading session, traders should carefully watch how the price behaves before and after the speech of the FM .
In 2023, the Indian market has been muted in the month before the Budget so far. The Nifty has risen just around 0.1 percent in January till date.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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