Budget & Market?

panchu7 · #1 9th February 2005, 12:34 PM

Hi Folks can anyone explain me how would market behave. Basically this is the first time I am trading & facing budget.

Traderji · #2 9th February 2005, 02:40 PM

Quote:

Originally Posted by panchu7

Hi Folks can anyone explain me how would market behave. Basically this is the first time I am trading & facing budget.

Broadly, there are two ways to look at this:

If the budget surpasses market exectations then the markets will definately surge. On the other hand if the budget is below market expectations then you could see the market correcting.

nkpanjiyar · #3 9th February 2005, 09:27 PM

Quote:

Originally Posted by Traderji

Broadly, there are two ways to look at this:

If the budget surpasses market exectations then the markets will definately surge. On the other hand if the budget is below market expectations then you could see the market correcting.

Thanks Traderji for very short and clear explanation.

Adding to this, Finance minister P Chidambaram said that the core areas of future tax reform included removal of unsustainable and discretionary exemptions, moving to Asean levels of customs duties, a value-added tax regime from April 1, expansion of the list of services for taxation and broadening of the tax base.

Looks like the Indian Budget 2005 is going to be an interesting one.

Regards,
nkpanjiyar

sh50 · #4 10th February 2005, 07:40 AM

Mr Ashwani Gujral has made some interesting observations on this topic in his book on TA and derivatives:-

He says that prior to 2002 before derivatives were introduced, it was expected that the budget would show huge volumes. The budget used to have more importance because of the announcements that the govt made in rationalisation of duties and taxes. Since these are not likely to change abruptly and now the govt will be forced to make economic decisions throughout the year as the Indian economy becomes more developed, the budget shall lose its importance.(Also because after 10 years of liberalizatrion, as govt control over business mitigated, as it is budgets have lost their stranglehold) He observes that because of all these reasons the budget is more of an index play and does not really affect individual companies. Interesting views. For those interested, he advocates selling an at the money straddle after checking that implied volatility is greater than historical volatility.

andy · #5 10th February 2005, 10:28 AM

If one is not sure which way the market will go the most simple trading strategy would be to BUY a out of the money March Nifty Call & March Nifty Put.

This way one will be able to book some profits if the market makes a big sharp move in any direction.

Any comments/discussion from other members on this strategy is welcome!

sumit baldua · #6 19th February 2005, 07:13 PM

I Agreee With U
Buy Nifty 2150 Call

Buy Nifty 1950 Put

Both Of March

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