Nifty Trends & Sector Growth Expectations for Union Budget 2025-26

Sachin Gupta Sachin Gupta

Last Updated: 31st January 2025 - 12:08 pm

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On February 1, 2025, Finance Minister Nirmala Sitharaman will present the Union Budget at a time when the Indian stock market is facing significant challenges. The market is struggling with a slowdown, foreign capital outflows, and growing uncertainty surrounding global events—particularly the US Federal Reserve's interest rate decisions and Donald Trump's trade policies. On top of that, geopolitical tensions, supply chain disruptions, and fluctuating commodity prices have added to the volatility. Given these factors, all eyes are on the Union Budget as investors and analysts hope for clarity and stability.

Market participants are looking for a balanced and forward-thinking budget that emphasizes fiscal discipline while also fostering economic growth. There is a strong expectation that the government will focus on long-term growth initiatives, such as enhancing infrastructure, boosting manufacturing, and supporting digital transformation. Additionally, tax reforms, social welfare, and agricultural support are likely to be central themes, along with measures to tackle inflation and reduce the fiscal deficit.

However, a key factor that will influence market sentiment is how the government tackles unemployment and fosters job creation, especially in emerging sectors like technology and renewable energy. As the economy continues to recover from previous disruptions, there is increasing pressure for policies that can spur economic revival while ensuring long-term sustainability. The government’s approach to these issues will significantly impact investor confidence and shape market trends in the coming weeks.

Nifty50 Pre-Budget Performance in the last 5 years

As of January 2025, the benchmark NSE Nifty 50 index has dropped by more than 2.1%, continuing the trend observed in the month leading up to the Union Budget over the past five years. In four out of the last five years, the Nifty 50 has declined in the month prior to the budget. The only exception was in 2024, when the index surged by more than 4% in anticipation of the event. In the other four years, however, the index fell by up to 2.5%. This trend reflects a cautious market ahead of the fiscal announcements, with investors remaining wary of the potential impact of policy changes.

Expectations from the Union Budget 2025

The Union Budget 2025-26 is anticipated to center around themes of national progress and long-term economic growth. The budget is expected to introduce measures that will drive development across various sectors, with a focus on building a stronger, more resilient economy. This could include policy initiatives aimed at enhancing infrastructure, promoting manufacturing and fostering digital innovation. In addition to these, there is likely to be a focus on tax reforms, agricultural advancements, and expanded social welfare programs. The government may also address healthcare improvements, education, sustainability efforts, and initiatives to stimulate job creation in emerging industries. These measures would align with the broader vision of transforming India into a globally competitive and inclusive economy.

Market Strategy on Budget Day

On Budget Day, you can expect high market volatility due to significant participation and heightened expectations surrounding the budget. However, history shows that traders often speculate in advance about whether the news will be favorable or unfavorable. Therefore, traders should focus on derivatives data and momentum strategies using options, rather than taking outright positions. We recommend monitoring the price of a straddle, a non-directional options strategy, which can help you to make profit if the market moves in either direction on Budget Day. This strategy will also give you an idea of the potential momentum based on the total premium (CE & PE)of the Nifty 23,400 ATM strike price options (Call 310 + Put 300 = 610), factoring in the budget event. In short, the market is pricing in a price move of approximately +/- 2.00% to 2.50% between now and expiry.

Note: The above calculation is intended solely to forecast price momentum and is not a recommendation.
 

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