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00:00Hello and welcome to this special show. As we count down to Budget 2024, all eyes are
00:12on working and looking at July 23rd is when the Finance Minister will unveil the full
00:18budget. Well, this show will focus on what your budget strategy should be for a short
00:22term trader, medium investor or a long term investor. To begin the show, we have to take
00:28you through what those previous budgets have done and how the markets have behaved in those
00:32conditions. Since 2010, there have been 17 budgets, 14 were full and 3 were interim budgets.
00:39The average return one week prior to the budget has been 0.45% negative. And this time around,
00:46remember, the markets have already rallied sharply in the last 20 trading days. The nifty
00:51is up over 10% in the last 20 trading days as indicated. Now, does this call for profit
00:57taking or does it call for initiating fresh long positions? Chandan Taparia, Head of Technical
01:02and Derivative Research at Motilal joins in. Hi, Chandan, thank you for taking out the
01:06time to talk to us. If we look at historical data, the one week prior to the budget being
01:12announced is usually negative, flat to slightly lower. This time around, we are going into
01:18the budget with significant gains. The nifty is up over 10% in the last 20 trading days.
01:25Some may argue that there is a little bit of fatigue that the markets are showing.
01:29But between now and 23rd of July, how would you position a trade on the nifty?
01:36Yeah, thank you, Samina, for a fantastic question about the market and the budget ahead.
01:42If you look at the overall sentiment of the market, the trend is in tech to positive.
01:48I believe the budget is going to be on 23rd of July and because of that,
01:53the volatility might see some spike. That is the first thing we need to keep in mind.
01:57The India Weeks, which was at 32 at the time of the election result, has corrected from 32 to
02:03sub 13 levels. But we believe that because of the budget, volatility might see some spike
02:09and it can head to our 16 to 18 zone. But if you ask about the market setup,
02:14the major trend is positive and because of any trigger, if volatility happens,
02:18I think that will be bought. Because the structure of the index is quite positive
02:22and we have seen the sector rotation and selective heavyweight stocks are doing well.
02:26At the time of election, the index drifted all the way to 21 to 80 kind of level,
02:33but we witnessed a recovery of more than 3000 points in just 23-24 trading session.
02:39So that clearly indicates that liquidity is there in the system.
02:42FI's also covered their short position. DI's are continuously buying.
02:45SIP flow is more than 22,000 crore per month. So if I combine all the data setup internal
02:51and even considering the previous couple of budgets, I believe the market has higher base.
02:57Major support for the index goes as 23,500. With this support, any small decline towards 24,000
03:03could be bought and overall we are looking for an upside really to extend to 25,000 marks.
03:09So I believe 23,500 to 25,000 will be the wider range with positive bias and any decline could
03:16be bought in the market looking at the next event. Just taking a cue from that Chandan,
03:22in that case, of course, traders can initiate naked positions on the long or the short side,
03:31keeping the range in mind. But I would imagine an option strategy may be better direction agnostic.
03:37Do you feel like butterflies, longs, triangles, straddles could be a better way
03:43to play the budget trade between now and then?
03:46Yeah, I think trading an option will be more advisable or better advice comparatively. Because
03:52yes, event is there. So we can't ignore the volatility which usually happens at the time of
03:57event. But we need to keep two things in mind. First, whatever the strategy we want to deploy,
04:03we will go with some direction to play the delta drifting. Second, your volatility is not spiked
04:10up. As of now, we are at 13.6. So we have to look at the strategy where we get the benefit of the
04:16vega spike before the event and after the event, the volatility will again go down. So I'll go with
04:23bull call butterfly with the view that some positive upside will be there. But again,
04:29two or three factors are there which are keeping us to think about the restricted upside. First,
04:34your RSI has gone to 70 level. FI's long short ratio has gone to overbought zone of 88. But yes,
04:40momentum is positive. That's why we are not changing the distance. We are being positive,
04:44but now the view is positive range bound. So now what we can do, we can buy 24,300 call.
04:51So we can buy one lot of 24,300 call. We can sell one lot of 25,000 call and we can sell
05:00one more lot of 25,500 call. So we are initiating 700 plus 500 points bull call ladder or bull call
05:09spread or we can convert into the bull call butterfly. So the aim is to get some positive
05:15move without getting hurt from the theta decay. And that is the reason we are selling out of the
05:20money also. But again, budget is there. So we don't want to pay more. We don't want to take
05:25more risk. So we can hedge as well. So two types of strategy or three types of strategy we can
05:29advise. First, buying at the money call, selling 700 points OTM call that is called bull call
05:35spread. Then sell further 500 points more OTM that convert to the bull call spread. Otherwise,
05:41if someone is looking for butterfly, buy 24,300 call, sell two lot of 25,000 call, sell and buy
05:48one more lot of 25,500 call. So this is how you can initiate the strategy with the view that view
05:54is positive to range bound. But yes, there are many people who believe that market has already
05:59seen the good run-up. Even in this year, the index is up by around 11-12%. Many mid-cap,
06:04small-cap, heavyweight scouters really did. And whenever there is the event, we always think about
06:09the hedging activity. So those who are looking for hedging, they can buy 24,000 put and sell
06:1623,000 put. So one can create the hedge of thousand points. Even we are not expecting
06:21it to go below 23,500, but hedging is always advisable in the market. So view is positive,
06:26positive to range bound. But at the same time, we also advise to go for some hedging activity
06:31with the view that we want to mitigate the risk and we want to maximize the return in the market.
06:57Chandan, for July 23rd expiry or would you say that running it for the whole month
07:03may be advisable or probably more profitable? Yes, so we will go with monthly expiry. 25th
07:09is the monthly expiry for Nifty. 24th is the monthly expiry for Bank Nifty being Thursday
07:14and Wednesday respectively. So I'll go with monthly expiry of 25th of July for all these trades.
07:20We also have with us Firoz Aziz, Deputy CEO at Anandrati Wealth joining in.
07:27Hi Firoz, thanks for joining in. It's Amina. It's been exciting. The last few weeks,
07:32the last few months have been exciting, but let's not forget after many, many years,
07:37this is the first budget that a coalition government is going to be unveiling for us.
07:43From somebody who's tracked so many of these budgets historically,
07:46what do you think is the expectation today? What is a wish list from a market participant
07:52and from somebody who advises long term investors? Good afternoon, Amina. To my mind, like you
07:59rightly said, this is the first maiden budget of this coalition government. Of course, it's not
08:06like a pure play coalition government because the majority, of course, the 272 mark was not
08:10crossed, but I think it's still a powerful government. So I personally from a market
08:15capital market standpoint have two, three expectations, not from a tax standpoint,
08:20but from an economy standpoint, the first expectation is the fiscal consolidation
08:25should continue. That's the first expectation. The second expectation I have is the capital
08:30expenditure implementation of the 11 lakh odd crores, which is 11% growth. That should happen
08:35efficiently. That's the second expectation. The third expectation is the last term,
08:40the disinvestment targets were not met. But this time around, I hope the disinvestment
08:44targets get met. 36,000 crores is what was the average disinvestment as against 60-65,000 crores,
08:50which was targeted. So these are the three broader expectations. But from a fiscal
08:55consolidation standpoint, if I dwell deep into it, I personally think that the fiscal deficit
09:01targets are being met. And actually, first time ever, not first time ever, but very few times have
09:07we kept our fiscal deficit numbers down by a lakh crores, which I think is brilliant. The tax
09:13collection on the GST side, the growth has slowed down, but the direct tax collection is expected to
09:19grow at 30%. So that should support fiscal consolidation. I personally think prudence
09:24with respect to fiscal deficit is very critical for the FII to see this economy as a far more
09:29positive economy over the next 10-15 years. And that I think in this term has to get more and
09:35more established and reinforced for foreign investors to become more sticky, unlike the
09:40last few months. Right. Firuz, I'll spend some time talking about capital expenditure because
09:45I think that's going to be very critical for the markets. But just before I go into that,
09:49there was a bumper dividend payout by the RBI. How do you feel this money is going to be used
09:55and spent? Is it going to have a significant impact on reduction in market borrowings,
09:59you think? And hence, that then has a follow-on effect on the debt market and then equities as
10:04well. Samina, in my opinion, of course, the dividend has been 2.1 lakh crore. I was against
10:100.9 lakh crore just the previous year. Of course, it's a lakh and a 20,000 crore more of dividend.
10:16And I think the PSU Bank's dividends have also been very good and they are expected to be good.
10:21But I don't see this as one of the tool or one of the lever which can bring down borrowing of
10:26the government. I think the borrowing, net borrowing of 11 odd lakh crores will happen
10:32because the expenditure is going to grow and the budget size is going to be almost about
10:3547.66 lakh crores growing by about 7.3 percent vis-a-vis the 44.4 lakh crore,
10:42which is the provisional number so far for the last fiscal. So, what I'm saying is this extra
10:46dividend will be cushioning the expenditure increase of about 7.3 percent and the borrowing
10:52of 11.5 lakh crores, net borrowing and the gross borrowing of 14.1 lakh crore may remain.
10:59But still, the yields will be softened because of our inclusion in the bond index. $12 billion
11:03have come from September after globally. I think another $18 billion is expected. So,
11:08I think the yields and the long end of the yield curve may not rise in spite of the borrowing
11:12remaining elevated given the fact that RBI has given a larger dividend. But I don't expect
11:18net borrowing to come down, Samina. And I think it's a brilliant question and that's what the
11:22debt market is looking at. Firoz, the space that's been most excited ahead of the interim
11:29budget, ahead of the elections and now, of course, the final main budget has been PSU stocks. And
11:36when I say PSU, I specifically mean railway, defence and fertiliser. It's been so tough to
11:43read what these stocks are getting up and of course, Chandan may have a better idea on the
11:47charts. But fundamentally, do you feel like the markets are getting ahead of themselves in terms
11:52of expectations? Or do you feel this budget is going to be all about growth, development and
11:58sectors like defence, railway and fertilisers? Yes, I think they have definitely from a valuation
12:06standpoint and if you look at that as the dimension, of course, they've gone ahead
12:10in terms of what valuations you would want to give these companies and these sectors,
12:16definitely ahead of time and ahead of earnings for sure. But second point is, I think these
12:21stocks, free floats have already been gobbled out and I think the free float available for people to
12:28grab is very low. That's why every unit of rupee invested in these stocks is resulting in a
12:33re-rating. Unless this liquidity cycle gets broken, I think this whole fundamental being
12:40looked at is going to be a far-fetched thing. So we are tracking the liquidity in these sectors
12:44very closely. Like if you look at the SBI infrastructure fund, which is the largest
12:48AMC's infrastructure fund, I look at its inflows every day. Unless this inflow, like yesterday,
12:54there was about 100 crore inflow, 75-80 crore inflow if I'm not wrong. So what is going to
12:58happen is, unless this cycle of liquidity breaks, fundamentals will not be looked at. So the focus
13:05will shift as soon as this starts taking a breather. So we at Anand Rati, we've been very clear,
13:12be the broader market or be these hard sectors, we will be the first ones to pass the pillow as
13:16soon as the tide of liquidity turns and then the fundamentals take the primary seat in terms of the
13:23valuations. I think till that happens, I think I would be ignoring valuations for some more time,
13:28maybe a couple of months or six months or even as latest as one week later, the liquidity dries up,
13:34reality will sink in. Well, no one knows whether reality is valuations anymore, right? I mean,
13:39it just seems like they're in a little bit of a unicorn world in that sense.
13:43Chandan, how do you feel about it? You know, historically, we've always seen fertilizer,
13:47railway stocks do well ahead of the budget. This time around, you've got defense names.
13:52In the last two years, they've been such an important and significant part of where money
13:57has been coming into in the broader markets. Today is no different. Stocks like RVNL, IRFC,
14:02IRCTC, RailTel are doing exceptionally well. So this is a two part question. If you own these
14:10stocks in railway and defense, what do you do? Do you take profits off the table ahead of the
14:15budget? Or if you don't own these stocks, would you recommend buying fresh or opening fresh
14:21positions in any of those railway defense fertilizer stocks between now and the 23rd of July?
14:27So we have a positive view on the entire Nifty CPSC index. That means it combines defense,
14:33shipping, railway, PSU banks, even fertilizers, power and energies. And we believe that most of
14:40these sectors are likely to do well given the price structure. We are bullish in the entire
14:45CPSC from the last couple of quarters, and most of the sector and stock have really done well.
14:51Still, I believe the momentum could continue here. The way the flow and the sentiment,
14:55the setup is clearly visible on the chart basis. So I believe one can continue to hold the shipping
15:00name or defense name, whether we talk about HAL, BL, or a counter like Paras, BDL. Even in railway,
15:08positive on the IRCTC, RVNL, IRCON, a positive name on most of the fertilizer names. And I think
15:15months of progress will also hit the momentum and the positive stance here.
15:19In fact, if you want a couple of names from housing, finance, infrastructure and construction
15:23could be in focus. Companies like NBCC, Hoodco, IREDA, all these stocks will be in focus in the
15:29Nifty CPSC. Those who are holding, they can continue to hold the position with the view
15:34that further 10 to 20% run-up could continue. Those who are looking to it, they can also
15:39definitely be here. I believe this sector, which has already seen the good momentum and strength
15:44is there, that is likely to continue. So one can be here, and I believe some sort of alpha
15:49generation could be seen here over the next one, two, three months in the market.
15:54Sorry, I'm just going to try and make this a little more specific. So if one has to build
16:00out a concentrated portfolio on the trading side between now and the budget and pick stocks from
16:08the sectors we discussed, give me three to four names that you would add significant wealth to,
16:16because if you've got to see a significant movement, then you will have to have a relatively
16:22large allocation to these three to four stocks. So three or four stocks in the sectors we mentioned.
16:28Yeah, so I think I've discussed a couple of sectors here in stock as well. So if you want
16:33me to include the three to five names, first I'll go with HL, Hindustan.
16:38Your top three to five stocks.
16:40Yeah, so I'll go with HL. However, the stock has really done well, but still we have
16:45potential upside of 20-30% from current level. So when I can select from a defense that is HL.
16:52Positive view on NBCC. So here expecting further momentum. Just a couple of days back,
16:57it gave a major breakout on the daily and the weekly chart, and it has potential to really
17:01towards 250 level. So HL is the first name, NBCC is the second name. In fertilizer, I'll go with
17:07the FACT. FACT has really seen the narrow range breakout on the weekly chart. Even on the monthly
17:12basis, we have seen good run up in the last month. And now after the consolidating move of 10-12 days,
17:17again, some attraction is clearly visible. So 1250 kind of target could be seen here.
17:22Apart from that, when we talk about the budget, capital allocations need to keep in mind. So I
17:27cannot ignore the capital goods name. And in that, I'll select the L&T. With the view, this is going
17:32to be the major beneficiary, whether there is a benefit in the defense or order or anything related
17:38to the capital infrastructure. So L&T will be fourth name. And one more I can select in the EV,
17:44whether you talk about Olectra or any other. So these are the couple of stokes I think one should
17:49take to play the budget theme. With the view, the budget will be for India and focus will be the
17:54infrastructure, focus will be growth for the country and focus will be on skill India or
18:01making India or making defense more progressive in the country.
18:05Right. Very lastly, Firoz, what is the advice to medium and long-term investors? Should they
18:11consider tweaking their portfolio as you go into this budget? Or do you feel like while it may
18:16induce a little bit of volatility, the long-term vision and portfolio should remain the same?
18:22I think there are three pieces of advice for a long-term and a medium-term investor. Medium-term,
18:26by which I mean three year plus. Long-term, by which I imply five to six years. The first one is
18:31your equity exposures can still be higher. If you don't have for your five years money is greater
18:36than 70-75% in equity, I think there is still a very important increase in allocation needed. So
18:42I would not recommend anybody to be less than 70-75% for five years monies into equity.
18:47Making money in debt is not going to be so easy. Even if interest rates were to come down,
18:51the long end of the yield curve will not make you too much money because it's not gone up. That's
18:55point one. Point two, if you have been in the broader market, which is mid-cap and small-cap,
18:59it is time to take some money off the table. Quite a few people have been negative from last October
19:04in terms of valuation, but I think liquidity has brought them here. I think taking some money off
19:09the table and still the broader markets will do well, but if your allocations and small-caps have
19:14exceeded more than 25%, you would have to bring it back below 25% and about 20-25% in mid-cap and
19:2050-55% in large-cap. I think that's the second piece of recommendation. Third, please don't
19:26put your money, long-term monies into thematic schemes because the themes are very popular
19:31and diversified funds are also exposing themselves to several sectors which are actually being
19:36independently launched as sector funds. I see several retail investors buying sector funds.
19:41I think that's something which is avoidable at these current valuation levels. Looking at three
19:45derivative indicators, I would say the market is now grasping for breath and that kind of rally.
19:51On 4th June, of course, I was very positive, unlike most, but I think now the FIR long positions
19:57have exceeded 84%, which is a great sign of a reversal or at least a breather. So, don't get too
20:05carried away with the rally which we have seen this expiry from 4th June, the last expiry from
20:104th June of the election. Keep your emotions out of this. I think that's probably one of the most
20:15important lessons one needs to learn when it comes to investing in these very euphoric markets,
20:20but at least for now, the going is looking good. Thank you, gentlemen. Good talking to both of you,
20:24getting some perspective on what the market would like to see from this budget and how
20:28you should be trading and creating a portfolio at a time when uncertainty will start picking up.