How to trade on a budget day -2017

No other day is as important to the stock market as the day the Finance Minister unveils the Union Budget. This year, finance minister Arun Jaitley will rise in the Lok Sabha to present the budget almost a month earlier on 1 February. Earlier, it used to be on the last working day of the month.

The budget day comes with all the excitement as definitive market moving announcements are made. That said, the budget speech assumes greater significance this year, considering the demonetization and the pending implementation of the Goods and Services Tax (GST).

So how should you prepare for the upcoming event as an investor in the stock market? Here is a guide for you:

Also read: Union Budget

Your First Trade

If you have a demat and a trading account, and want to execute your first trade on the budget day, then you need to read up about the expectations from the budget. These expectations serve as benchmarks. The budget announcements will then be compared with these benchmarks. This can decide the movement of the share prices. Basis this movement, look for buying opportunities.

The Regulars

If you regularly buy or sell shares in the market, you are aware of the importance of the Budget day. The budget speech usually starts at 11 am. While this is after stock markets open for trade, there is usually limited action until the budget speech. Everyone is anxiously waiting for the finance minister to speak. Trading is often thin and prices move nowhere. This could be your chance to pick some fundamentally strong companies. If you are confident enough, you can pick infrastructure, healthcare or agriculture-linked shares. These are the sectors that the government is expected to invest in and boost to offset the impact of demonetization.

Following The Speech

The Budget speech is usually divided into two parts. The policy action is outlined in the first part and tax proposals are unveiled in the second. This year, the format may change a bit. The government has done away with the practice of having a separate railway budget. The general budget will include an allocation to the railways. Some key announcements for the latter are likely to be made in the budget. Companies that are linked to the railways sector are likely to swing into action when the finance minister speaks on the topic.

Also read: Highlights of Union Budget 2019