With the Union Budget 2025 just around the corner, India’s stock market is experiencing increased volatility. The India VIX, a key indicator of market fluctuations, surged by over 5% leading up to Budget day. Historically, the market has shown a mix of both gains and losses on the day of the Budget announcement and in the lead-up to it. The benchmark NSE Nifty 50 index has seen varying movements, with large swings in previous years, making it difficult to predict the immediate market response. Given these uncertainties, Zerodha’s co-founder Nithin Kamath has urged traders to exercise caution, especially on Budget day. Kamath recommends reducing trading size if you cannot avoid trading, as event days are typically more volatile.
Nithin Kamath further highlighted that Zerodha would allow Buy Today, Sell Tomorrow (BTST) trades even on days with settlement holidays, like on the upcoming Budget day. However, he emphasized that despite this flexibility, traders should avoid making large volume trades, as the market is expected to be highly unpredictable. The fluctuations in the stock market on Budget days have been significant in the past. For instance, in 2020, the Nifty 50 dropped by 4.17%, while in 2017, it rose by 3.87%. This inconsistency in market performance reinforces the importance of cautious trading ahead of and on the day of the Budget.
Over the past five years, the Nifty 50 has typically declined during the week leading up to the Union Budget. This trend underscores the unpredictable nature of the market surrounding the event, with sharp changes observed in both directions. Traders are advised to monitor market conditions closely and be prepared for heightened volatility. Kamath’s advice is clear: despite the opportunities for trading, it’s crucial to reduce risk exposure during such high-stakes market events, as the outcomes are highly uncertain. Traders are encouraged to focus on managing risk rather than seeking quick gains on potentially volatile days.