Benchmark indices Nifty50 and BSE Sensex rose sharply today, i.e. on January 31, due to short-covering, ahead of the presentation of the Union Budget on February 1. Nifty was trading 279 points or 1.6 per cent higher at 17,381.5 during this afternoon, while BSE-Sensex was trading up 1.7 per cent or 963 points at 58,169.4. The market saw gains despite the government suggesting to reduce economic growth to 8.0-8.5 per cent in 2022-23 from the expected 9.2 per cent in 2021-22.
According to NSE data, buying in the market was witnessed by traders who rolled over large short positions in the February derivatives series in Nifty. Open interest in Nifty’s February contracts declined by eight per cent to 97.5 lakh.
Ahead of the Budget, foreign portfolio investors took net short positions of over 50,000 contracts on February futures of Nifty, reflecting their dismay amid fears of a sharp hike in US interest rates in 2022.
After selling in the last two weeks, the focus has now shifted to the budget. The market expects the government to boost capex and support the consumption economy.
The brokerage expects spending on capital expenditure to increase by 20 per cent for 2022-23 as the government seeks investment-driven economic reforms. Economists also expect some measures to be taken to reduce the stress on the pockets of the lowest-income consumers due to the pandemic.
Brokerage firm Edelweiss Securities said in a note, “The budget should balance both growth and sustainability objectives: an uneven recovery calls for continued policy support, while a wider trade deficit and the Fed’s potentially dire warrants of financial caution.” demand.”
Buying enthusiasm in the market a day before Budget 2022, know from Ashish Baheti Nifty, opinion on Bank Nifty and strong calls
Simultaneously, a similar relief rally in global equity markets has given rise to the market. On January 28, Asian stocks were also seen rallying, tracking the sharp gains in US stock indices. Given the concerns of consolidating financial conditions in the global economy, this growth is not considered certain.
Dealers said volatility gauge India VIX rose 6 per cent to 21.93 points on January 31, indicating the level of uncertainty among trade takers in the market. These people are hedging their exposure to any sharp downside in the market by lapping the put option of Nifty.
On the technical side, Gaurav Garg of Capitalvia Global Research said that the level of 17,000 mark could be an important support level in the market. “If the market holds above 17,300, we can expect the market to trade in the 17,000-17,500 range,” he added.
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