Record Highs: Trading Strategies for Budget 2024-25

As India approaches the presentation of the Union Budget 2024-25 on July 23, the market landscape presents a unique blend of anticipation and caution. Since the election results on June 4, 2024, the Indian equities have surged ~16.5%, marking a historic high with the NSE Nifty 50 index topping 24,800 and Sensex crossing 81,000 for the first time ever on July 18, 2024.

However, underlying this optimism is a cautious sentiment, given the market's overbought condition. Disappointments in budget announcements or first-quarter earnings could lead to a correction, especially since the Nifty is currently overvalued with a P/E ratio of 23.4x, which is above its 2-year average of 21.9x. Given these dynamics, maintaining vigilance around these levels and hedging against potential volatility becomes paramount.

Trading Strategies for the Budget

Trading Discipline and Risk Management

With the Q1FY25 results season coinciding with the budget, market volatility is expected to be high. Traders are advised to maintain strict trading discipline, avoid over-leveraging, and always use stop-loss orders to protect investments. This approach will help manage risks effectively, especially in a high-stakes environment.

Long-term vs. Short-term Investment Perspectives

While it can be tempting to trade aggressively based on short-term budget reactions, it's often wise to adopt a longer-term perspective. Market movements around the budget tend to follow a "Buy on rumours, Sell on news" pattern, making it critical for investors to consider the long-term implications of any budget announcements on their holdings.

Sector-Focused Investments

Prioritize investments in sectors poised to gain from the budget. For detailed insights, refer to: Union Budget 2024-25: Sectoral Insights & Analysis. Additionally, park funds into defensive sectors like FMCG, Healthcare, and Utilities, which typically maintain steady performance through different economic cycles. Within these sectors, large-cap stocks are preferable due to their significant catch-up potential compared to mid-caps, which are trading at record premiums.

Diversifying Investments

Diversification remains a key strategy to manage uncertainty and reduce risk. Investing in well-structured Wealth Baskets or Mutual Funds can offer the necessary diversification, especially for those with limited trading expertise or capital. This strategy not only spreads risk but also positions the portfolio to benefit from potential gains across various sectors. Liquide’s “India Growth” basket aligns well with these strategies, aiming to deliver superior risk-adjusted returns over time.

Conclusion

As we edge closer to the Union Budget 2024-25, the Indian market presents a mixed bag of challenges and opportunities. Traders and investors alike must navigate this landscape with a well-thought-out strategy, balancing between seizing short-term opportunities and aligning with long-term investment goals. By focusing on disciplined trading, sectoral strengths, and diversified investments, investors can look forward to potentially rewarding outcomes in this dynamic market environment.

Live Coverage of the Budget on Liquide

To navigate through the market's volatility on this crucial day, make sure to connect with the Liquide App. We promise exclusive, unmatched coverage of the 2024-25 Budget, providing real-time updates, thorough analysis, and valuable trading insights. Download it today from the Google Play Store or Apple App Store and begin your journey towards informed and successful investing.