Trade setup for budget day on Feb 1: How NIFTY50 reacted on past 5 budgets; will the index break out of the consolidation on Sunday?

The NIFTY50 closed the month of January in the red with nearly 3% losses after battling external headwinds on renewed tariff threats, geopolitical uncertainty, FII selling, currency depriciation among others. However, positive factors like the India-EU trade deal helped the markets to recover from lower levels. The India Vix, a crucial volatility indicator, jumped above 14, indicating a heightened volatility scenario ahead of the budget day session.

GIFT NIFTY futures are expected to open higher on Sunday morning after closing 25,443 levels on Friday.

NIFTY50

Max call OI:25,500

Max put OI:25,000

(Ten strikes to ATM, 03 Feb expiry)

Budget has remained a crucial day for traders, given its high intraday volatility and the opportunities it provides. Considering the current trading setup, with multiple external factors at play, the budget day is expected to remain volatile. The India Vix closed at 13.6, which gives an expected implied move of close to 1%. However, budget volatility also fades soon after the speech is over, and the market decides the direction on the basis of broader sentiment.

NIFTY50 chart

On the technical charts, the NIFTY has shown a sharp reversal from the 25,000 levels, indicating bulls holding a stronghold at the downside. While the upside remained capped at 25,500 due to the lack of positive triggers and mixed signals from the global markets. Experts believe that for the index to reclaim the bullish momentum, a weekly close above 25,500 is a must. On the other hand, the 25,000 support remains the borderline for bulls to hold back from entering into a bearish territory.

Options strategy

On the options data front, the 25,000 puts held the highest open interest on the downside, indicating strong support. On the other hand, the 25,500 calls held the highest open interest, indicating a strong resistance for the budget day.

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Long buildup: - Nestle, Tata Consumer

Short buildup: Hindalco, Tata Steel, Coal India

Top traded futures contracts: Hindustan Zinc, Vedl

Top traded options contracts: Infy 1720 CE

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