As Budget Day nears, market participants are closely watching the NIFTY and BANK NIFTY indices, considering historical trends for July 23.

As Budget Day nears, market participants are closely watching both the NIFTY and BANK NIFTY indices. The BANK NIFTY has been consolidating between 52,800 and 51,700 levels over the past 10 trading sessions, forming an inside candle on the weekly chart, suggesting a range contraction ahead of the Union Budget announcement and HDFC Bank earnings. Meanwhile, since the general election results on June 4, the NIFTY50 has surged over 15%, reflecting investor optimism, with the index dropping more than 1% only three times during this period.

Historically, the NIFTY has seen an average move of around 0.3% over the last 14 budget sessions, typically closing within a range of -2% to +2% on Budget Day in 12 out of 14 sessions. However, in 2020 and 2021, the NIFTY moved outside this range, indicating potential for significant movements around budget announcements. Understanding these past trends can help in planning future strategies.

Market participants are closely observing the NIFTY index’s performance. Following the general election results on June 4, the NIFTY50 has surged over 15%, showcasing investor optimism. During this timeframe, the index has experienced a decline of more than 1% on only three occasions.

Historical Trends of NIFTY on Budget Day

Looking at the NIFTY’s past performance on Budget Day shows interesting patterns. The index has had mixed reactions to Budget announcements. In the last 14 budget sessions, it closed higher on 7 occasions. This shows a mixed trend, with some exceptions.

• Over the last 14 budget sessions, the NIFTY has had an average return of around 0.3%.
  
• Historical data indicates that on Budget Day, the NIFTY generally closed within a range of -2% to
  +2% in 12 out of the 14 sessions, suggesting a typical movement range of 4% on Budget Day.
  
• In 2020 and 2021, the NIFTY deviated from this trend by moving outside this range.
  
• In 10 out of 14 instances, the NIFTY recorded positive returns 10 days after Budget Day.
  
• The average return of the index 10 days post-Budget Day is approximately 1.6%.

Technical Overview of Nifty

The NIFTY index continued its winning streak for the seventh week in a row, finishing with a slight gain of 0.1%. Notably, after bouncing back from the week of the general election results, the index consistently closed above the highs of previous weeks up until July 19.

However, on Friday, July 19, the index experienced a correction of over 1%, which reversed its recent upward trend and prevented it from closing above the high of the prior week. Additionally, the index formed a shooting star candle, a bearish reversal pattern. This pattern will be validated if the next candle closes below the level of the shooting star.

Given the implied volatility and the closing price as of July 19, market participants are expecting the NIFTY50 index to fluctuate within a range of 2% above or below its current level as it approaches the monthly expiry of its futures and options (F&O) contracts.

With the Union Budget scheduled for announcement on July 23 and the NIFTY index (F&O) contracts expiring on July 25, the index is expected to experience significant swings both before and after the Budget announcement. This anticipated fluctuation reflects the index’s potential to vary by 2% above or below its current level.

Market participants are closely monitoring the performance of the BANK NIFTY index. Since the General Election results on June 4, the banking index has gained over 13% and has been on a steady upward trajectory. However, in the past two weeks, the index has lost some of its positive momentum and has mostly been consolidating within a range, leading to a mix of caution and optimism.

The index will initially respond to the FY25 first-quarter results of major banks such as HDFC Bank and Kotak Mahindra Bank. Both banks reported earnings and net profits that either met or exceeded market expectations. Afterward, focus will shift to the upcoming Union Budget.

Historical Trends of BANKNIFTY on Budget Day

Looking at the historical data from the past 14 budget sessions reveals that the BANK NIFTY has exhibited unpredictable behavior. Over these 14 budget sessions.

• The BANK NIFTY has ended in positive territory 8 out of 14 times, reflecting a mix of gains and losses.
  
• Typically, the average return for the BANK NIFTY on Budget Day is about 0.5%.
  
• After Budget Day, the index tends to perform better, showing positive returns on 9 out of 14 occasions following the initial fluctuations.
  
• On average, the return 10 days after the Budget is around 2.1%.
  
• The index has shown significant moves in either direction, as seen in February 2018 and July 2019, as it adjusts to the Union Budget details.

Technical Overview of BankNifty

In the past two weeks, as the BANK NIFTY approaches Q1 results from major banks and the Union Budget, it has been trading within a range of 52,800 to 51,700.

During this period of consolidation, the index has formed an inside candle on the weekly chart. To gain directional insights and identify potential range expansions, traders should monitor the breakout of the inside candle’s high and low on the daily chart. Additionally, a daily close above this range will offer further guidance on market direction.

Based on implied volatility and price movements as of July 19, the options market anticipates that the BANK NIFTY index could fluctuate by approximately 2.1% by the expiration of the options contracts on July 24.

With the Union Budget scheduled to be announced on July 23, just one day before the BANK NIFTY options expire, there is a likelihood of significant swings in the index. This potential for volatility is expected both in response to the Budget announcement and leading up to the monthly expiry of its futures and options contracts on July 31.

According to implied volatility and price movements as of July 19, the options market forecasts that the BANK NIFTY index could fluctuate by about 2.1% by the time the options contracts expire on July 24.

With the Union Budget set to be announced on July 23, just one day before the expiry of the BANK NIFTY options contracts, there is a potential for significant volatility in the index. This suggests that sharp movements are likely both in response to the Budget announcement and as the index approaches the monthly expiry of its futures and options contracts on July 31.

Index is expected to vary up to 2.1% above or below its current level by the expiry date of the options.

Power of Algorithms in Options Trading, Try Spider Now: Register Now

If you’d like to know how we analyze the market and provide accurate levels every day. then click on the Free Demo button below and change your trading life for good. 5X returns are possible in options trading If you have Spider Software in your trading system.

Disclaimer: The information provided in this Blog is for educational purposes only and should not be construed as financial advice. Trading in the stock market involves a significant level of risk and can result in both profits and losses. Spider Software & Team does not guarantee any specific outcome or profit from the use of the information provided in this Blog. It is the sole responsibility of the viewer to evaluate their own financial situation and to make their own decisions regarding any investments or trading strategies based on their individual financial goals, risk tolerance, and investment objectives. Spider Software & Team shall not be liable for any loss or damage, including without limitation any indirect, special, incidental or consequential loss or damage, arising from or in connection with the use of this blog or any information contained herein.