One of the most important domestic external events – the Union Budget – slated to come up today.
Six days continue downfall from top of all-time high should be taken as two angles.
1. Markets have little expectations from the Budget;
2. Markets are approaching the Budget with a high degree of caution.
The main points to consider are:
a) PCR of 0.98 reflects that both put and call options are written in equal proportion.
b) India Vix surged up to 25.34, which is a clear sign that market is overbought.
The markets are also likely to adopt an overly cautious approach against possible levy of any additional covid-related cess, tampering with STT or LTCG, or giving any such financial aids which may be perceived as wasteful and adding to the fiscal deficit.
Volatility point of view, we can say that Nifty can move approx 300 to 400 points on either side or both sides in the whole day.
We can expect a sideways and capped movement in the morning trade, but with the post-budget announcement, the market may move volatile.
There is a formation of a large bearish engulfing candle last session. The formation of such a candle following a steep downside often marks a potential bottom in place.
NIFTY’s getting back above the 50-DMA which presently stands at 13743 would be crucial on a closing basis.