The Union Budget 2023 is all set to be presented next week, and in the run-up to the event on 1 February, Indian share markets have become very volatile. NSE Nifty 50 tanked 1% on Wednesday to fall below 17900 intraday. Due to the Republic Day holiday on Thursday 26 January, this month’s and week’s F&O expiry is scheduled for today, which may increase market volatility. “We expect markets to remain volatile before the Union Budget, slated to be announced on 1st February 2023. This volatility will stem from several factors, including global inflation, growth and interest rate trajectory, expectations from the Union Budget, and the Q3FY23 earnings season,” said Nishit Master, Portfolio Manager, Axis Securities PMS.
Nifty technical set-up in the run-up to Budget 2023
“In the trajectory of the Covid-19 cases and interest rate hikes, as well as ahead of the major economic event Budget 2023, have caused the Nifty Index to trade in a volatile range this month between 18250 and 17800. The daily chart showed a trend line breakout on the higher side, and the MACD Histogram is above zero with a positive crossover suggesting an upward movement is on the way in the near term,” said Rameshver Dongre, Research Analyst – Equity Research, CapitalVia Global Research.
What should investors do ahead of the Budget? Where is Nifty headed?
In the short term, traders should remain bullish on the Nifty 50 as long as the 17800 level is intact. On the higher side, 18250 will be the next obstacle to be overcome for Nifty 50. If it breaches that level decisively, then 18500, and then 18625 levels would be possible. “Investors should maintain a bullish market view as long as the Nifty maintains its major support level of 17500 and can use the buy-on-dips support strategy, according to the monthly chart of the Nifty, which shows that a flag pattern has formed and that the breakout has already occurred, and on the higher side 20200+ levels can be seen,” Dongre said.
Hold positions for long term, use volatility to buy
Vinit Bolinjkar, Head of Research, Ventura Securities, recommends investors hold the position and buy on dips due to significant earnings growth prospects in the next 2-3 years. So instead of looking at 1-year average P/E, investors should bet on a multi-year growth story. “Recovery in banking credit across all segments is an early indicator for strong growth in the core sectors of the economy, which is likely to improve the overall EPS of the Nifty 50 index in the next 2-3 years. So we recommend investors hold their positions for the long term and use market volatility to buy on dips,” he said.
India to attract FPI flows; Increase allocation to equities
“Despite increased volatility and higher than historical valuations for the Indian markets, we believe one should increase their allocation to Indian equities on any dip since Indian remains the fastest-growing major economy in the world. In a scenario where global growth is slowing significantly, India will attract FPI flows, as they like growth stories,” said Nishit Master, Portfolio Manager, Axis Securities PMS.
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