Annual Tryst of NIFTY with the Union Budget

[Sunil]

Let's do a little R&D on budget's impact on Nifty's movements.

Considering 1 to 2 week movement after the Union Budget Speech Day:
{here, all figures in % are in comparison with the closing level of one trading day before the actual speech day... in other words, closing as on 27-Feb-20xx, except on leap years (2000 & 2008) and govt change year (2004)}


29-Feb-2000
Feb 2000 began on a positive note, and Nifty was bullish for most of the month.
Became sideways one week prior to Budget day.
For one week after B day. Nifty ranged between +3% and -5%.
Later, in the second week of March, Nifty dropped down 12% one way.

28-Feb-2001
Nifty was bearish for most part of Feb 01.
Nifty rallied UP 9% on B Day and on next day, but later, till mid-March 01, Nifty dropped down 14% one way.

28-Feb-2002
Nifty was bullish throughout Feb 02.
After B Day, it went sideways for most part of Mar 09 from flat to -5%

28-Feb-2003
Nifty was in sideways throughout Feb 03
Nifty rallied UP 2% on B Day and on next day, but later, till mid-March 01, Nifty dropped down 6% one way.

 

[Sunil]

8-July-2004
Nifty was stuck in a tight band after May 04 circuit down.
Nifty went DOWN 6% on B Day and on next day, but later, till settlement day of July 04, Nifty went one way up 3% slowly.
(These were the seeds of the super & historical bull run)

28-Feb-2005
Nifty ranged between 2000 & 2100 throughout Feb 05.
Went up 2% on B Day, and total 5% one way up till mid-Mar 05.

28-Feb-2006
Nifty was moderately bullish in Feb 06.
B Day was market holiday.
Went up total 6% till mid-Mar 06.

28-Feb-2007
Nifty was bearish in the run up to the B Day throughout Feb 2007.
Went down 5% on B Day, and total 8% one way down during first week of Mar 07.
Was sideways in the second week.

 

[Sunil]

29-Feb-2008
During Feb 08, Nifty was sideways and in a bit corrective mode after the big Jan08 crash.
Went down 3% on B Day, and total 15% one way down during first week of Mar 08.

 

[Sunil]

Historical MONTHLY Return:

 

[myvineet]

well done sunil bhai.....:clapping::clapping:

excellent research.....:thumb:

:hug:

 

[Sunil]

Buying Option Straddles a couple of days before the event. and letting it run for 1-2 weeks - IS it worth???

Found two very oldthreads on the same matter:
http://www.traderji.com/options/1614-will-straddle-nifty-option-budget-period-suitable.html
http://www.traderji.com/equities/1504-budget-market.html

[B][U]Year[/U][/B]                                       [B][U]Cumulative Nifty Movement[/U][/B]

2000                                                  12%
2001                                                  14%
2002                                                 (sideways) :mad:
2003                                                  6%
2004                                                  3% :mad:
2005                                                  5%  :(
2006                                                  6%
2007                                                  8%
2008                                                  15%

We see that ATM Straddles could juice out decent returns on 6 out of 9 occasions in the current decade.

Coincidentally, 2000, 2001 & 2008 (all 3 considered as bearish years) gave a double-digit return.

 

[Sunil]

After a retest of the same TL, the target has been achieved - thanks to the effective +ve divergence play in 60min:

Latest 60min Chart:

This is the last trading week (3 more days) before the Budget Day on 6-July. Ideally, it should not be a big ranging week, and hence expecting range contraction in daily & weekly chart.
2 day swing is up, with SL at 4250
So, maybe a broader range of 4250-4450 till budget....

62% of the entire fall - around 4780 - remains the Laxman Rekha.
Let's see Straddles cost as week progresses...
As of now, cost of 4400 straddle (mid pt of 4700 & 4100) is around Rs 400/- :-(
(ie 4800 & 4000 as breakeven levels)

4250-4450 being held so far - atleast 200 pts (5%) possible on break of either side.

After a series of LL LH downtrend from 4700 peak, Nifty is now attempting an upmove (maybe corrective).
4250 gets a tag of Higher Low if & when 4450 is broken, and Nifty closes above it. (here too 4250-4450 fight is on)

I am noticing a possible Hidden Bullish Divergence (read this, for more info)


Bringing in Fibonacci retracement levels for 4700-4150:
38% = 4360 (mid pt of 4450 & 4250)
50% = 4425
62% = 4490

 

[AW10]

Excellent analysis Sunil.

Happy Trading

 

[Sunil]

During the bearish years of 2000, 2001 & 2002, Nifty's movements became slow & sideways.
2001's budget rally was used for heavy profit-booking.

Even in 2003 & 2004 (the seeds of the big bull run), there was marked reversal of Nifty's movement from 2nd day after budget.

But, in the last four instances (2005, 06, 07 and 08), Nifty's movement was mostly uni-directional till 2 weeks post budget.

Looking at current technical status of Nifty, which is perfectly neutral & poised to break from the 4250-4450 range, we can expect a 5th consecutive year of uni-directional move:

on upside, on break of 4450 with a confirmatory break of 4500-15 (62% retracement + head of the beearish H&S on Daily chart)

on downside, on break of 4300, with a confirmatory break of 4250




Latest 60min chart with Divergence effect:

EOD chart:
Ball is in the 20DSMA court - another close above (especially, if today's bar is fully above it ie 4400), then 4700 is very much on cards - given the flattish Bollinger Bands

 

[Sunil]

During the bearish years of 2000, 2001 & 2002, Nifty's movements became slow & sideways.
2001's budget rally was used for heavy profit-booking.

Even in 2003 & 2004 (the seeds of the big bull run), there was marked reversal of Nifty's movement from 2nd day after budget.

But, in the last four instances (2005, 06, 07 and 08), Nifty's movement was mostly uni-directional till 2 weeks post budget.

Looking at current technical status of Nifty, which is perfectly neutral & poised to break from the 4250-4450 range, we can expect a 5th consecutive year of uni-directional move:

on upside, on break of 4450 with a confirmatory break of 4500-15 (62% retracement + head of the bearish H&S on Daily chart)

on downside, on break of 4300, with a confirmatory break of 4250

Target of rectangle 4450-4250 ie 4050 attained today.
Nifty came down 8% from Friday's (a day prior to Budget speech) close.

There was a brief failed breakout above 4480 on Budget day - although it did not sustain too long, I reckon it deserves 3850 for such failed upmove.
Break of H&S on EOD chart can give some push down...


(PS: after one week, I will close this thread until 15-Feb-2010 - no need to ask why this date!!!)