As Finance minister Nirmala Sitharaman prepares to unveil Budget 2025 on february 1 at 11 AM, traders and investors must prepare for an unpredictable ride in the stock market. Zerodha’s CEO, nithin Kamath, has issued a cautionary note, warning that market volatility is almost inevitable on Budget Day.
Historically, indian stock markets have experienced significant swings on Budget announcements. In the past 25 years, only eight instances have recorded fluctuations below 1%. This means that traders should brace themselves for sharp price movements, which could either bring big gains or steep losses.
What Does This Mean for Traders? Kamath advises active traders to exercise restraint. He specifically suggests reducing trading volumes on Budget Day to avoid unnecessary exposure to extreme market movements. Large swings can trigger stop-losses and force traders into panic-driven decisions. Market unpredictability means even the most well-planned strategies can fail, leading to unexpected losses.
How to Stay Safe?
Lower Your Trading Quantity – High volatility can amplify both gains and losses. Trade cautiously.
Avoid Emotional Trading – Market swings can be deceptive; avoid impulsive decisions.
Use Stop-Loss Wisely – Set stop-loss levels that account for increased volatility.
Focus on Long-Term Investing – If you're an investor, avoid knee-jerk reactions and focus on fundamentals.
Stay Updated – Budget speeches can lead to instant reactions. Keep an eye on market news and policy highlights.
Final Word: While the budget is a crucial economic event, it can be a double-edged sword for traders. Stay disciplined, manage your risks, and avoid overtrading. The key to surviving Budget Day is patience and caution.
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