Trade Setup On Budget Day: Nifty In Wait-And-Watch Mode As Analysts Predict Volatility

Its Union Budget 2024 time and all eyes will be on Finance Minister Nirmala Sitharaman on July 23 when she gets up in the Lok Sabha to read out India's economic roadmap for the ongoing fiscal. The Indian benchmarks, the Nifty and the Sensex are in a wait-and-watch mode with the SGX Nifty showing a flat opening is likely. Here is what the charts are showing.

The Nifty ended slightly lower at 24,509 on Monday, as the markets remained cautious a day before the Union budget announcement and with the growth forecast in the economic survey released during the day.

The broader market indices—Nifty Midcap 100 and Nifty Small Cap 100—outperformed the headline indices and closed higher by around 1%. Auto, metals, and pharma gained more than 1%, while IT, FMCG, realty and energy were the sectors that lost to the tune of 0.5%.

From a technical standpoint, the market (Nifty and Sensex) is currently exhibiting non-directional activity around the 24,500/80,400 level following a reversal formation. "With Budget Day looming, we anticipate heightened volatility. The 24,500/80,400 level serves as critical support for the bulls, while 24,850/81,600 could pose as the primary resistance zone for traders," according to Shrikant Chouhan, head of equity research at Kotak Securities.

Chouhan recommends reducing long positions during rallies, as long as the market (Nifty and Sensex) is trading below 24,850/81,600. "Buying is advisable only at major support levels (24,150/79,000 and 24,000/78,600) with a medium- to long-term perspective. If the market surpasses 24,850/81,600, it has the potential to advance towards 25,000/82,000 and 25,300/83,000 levels," he said.

"Though the budget is largely expected to be growth-oriented, with the announcement of some measures aimed at addressing rural economies, this is largely factored in by the market. Investors will look out for signs of further traction." He expects "some volatility, along with sector- and stock-specific actions," on Tuesday, according to Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd.

As long as the index remains below 24,855, a sell-on-rise strategy needs to be adopted in Nifty, said Hrishikesh Yedve, assistant vice president of technical and derivatives research at Asit C. Mehta Investment Intermediates Ltd.

The Bank Nifty index opened with a gap down, remained under pressure in the first half, but later witnessed buying interest and finally settled the day on a positive note at 52,280 levels. "Bank Nifty will find strong support near the 51,800–52,000 levels. On the upside, 52,800 and 53,000 will serve as strong resistance levels," Yedve said.

Kotak Securities' Chouhan said that the Bank Nifty has been consolidating between 52,800 and 52,000 for the last few days, and these same levels will act as trend decider levels on Tuesday.

GIFT Nifty was trading 2.5 points, or 0.01%, higher at 24,545.5 as of 06:41 a.m.