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Market Setup 1st February 

The month of February is here and 2019 is not a new year anymore! What February kicks in is a very important event of Budget and for the last 3 years, Govt has kicked in the practice of presenting the budget on the first day of the month instead of the last day of the month, which was a practice till 2015. Today is the budget day but this year will have two budgets one now and another in the month of July. This is going to be an interim budget which will be applicable for the first 5 months of this fiscal. Interim finance minister Piyush Goyal will present this interim budget which is likely to bring in a lot of sops for every segment of the population in India.

What are the challenges in today’s budget?

This budget is coming at the back of a dismal jobs data of NSSO that got leaked to a Business standard that has put the unemployment rate at 6.1% which is the highest since 1974. This was countered by Govt which said that this data is incomplete but that’s too little too late. The CMIE which is a private body that the measured unemployment in households has come up with a data that in the year 2018 we lost 1.8 Crore jobs and that will add to unemployment and they put the unemployment at 5.5%. Another big problem that Govt needs to look at is the fiscal deficit targets that Govt has been missing. Govt, when it took over in 2014 had a fiscal deficit of 4.9% of GDP and they brought it down to 3.5% by 2017 but after that the road has been rough.

What might go wrong for Govt?

The Demonetization which served no purpose, GST which hit the MSME sector very strongly has affected the economy as well as the fiscal deficit. The fiscal deficit for 2017 and 2018 remained at 3.5% and for 2019 Govt has aimed 3.3% fiscal deficit but looks like this target will not be met. Govt also has the practice of presenting annual economic survey one day budget but this year Govt has done away with that practice. All this will cast a shadow and the behaviour of the opposition also will be a crucial factor in presenting the budget. The opposition is very vocal and any attempts by the Govt to announce any sops will be met with a lot of noise and disruption and the Govt’s ability to manage the floor also will be a crucial factor to observe in today’s budget.

What to expect from the budget?

This is an election year and every Govt has the practice of presenting something for the poor and marginalised. In 2014 Chidambaram also brought in food security bill just before the elections but that simply did not work. This time Govt will be much wider in the spectrum as well as spending with big announcements expected on the tax front. A huge relief is expected to be given to the middle class and working class. Apart from that farm loan waiver or direct cash transfers in line with Rythu Bandhu scheme of Telangana and KALIA scheme of Orissa is likely to be announced. Added to this some sops for the business class which is the core voter for BJP is also expected. All this might put pressure on fiscal targets and market might not like them.

Budget 2019!
What is the Nifty call for the day?

We have closed our positions yesterday at 10750 and today we are expected to open around 10840-10870 range and that is a situation where we will encounter with the resistance zone of 10950. This is a macro event and only macro events can make markets to break the resistance. If the budget has the strength it will take the market above 10950 and will make it touch 11000. If it is bad then we might break 10700 and might go below that. This is a binary event and involves a lot of risks. Today my strategy is going to be different. I advise you to go long as soon as the market opens at 10840-10870 levels with 10950-11000 as the target. Keep watching the budget moves carefully and try to exit if that range is reached. If there is a fall then keep 10800 as stop loss and exit if things start to get adverse. Budget trading is a professional trading and you need to do it carefully and professionally.