Business
Pre-Budget volatility clouds Nifty, Kalyan Jewellers may see relief rally, says Anand James
Edited excerpts from a chat:
Given the sustained selling as weak rupee makes FII flee, how do you intend to trade Nifty in January expiry?Nifty’s feeble bounce off the 200 day SMA, and the close back below the same in the span of a few days is suggestive of markets anticipating more downsides. VIX has been rising steadily for four weeks now, pointing to higher volatility expectations. Though VIX near 14 is hardly a level of significance, the break and successive close above its 200 day SMA is suggestive of more volatility. We see the heavy call selling on Friday as a consequence of the holiday falling on the eve of the monthly expiry. For the first weekly contracts for February, traders appear to have positioned for falls as far as 24500 on the Nifty50, as is evident from the put options’ build up.
Over the past 15 years, the average return for Nifty one week before the budget has been negative at -0.52%, with the index closing higher only on 8 occasions. How does the trajectory look like this time?
Historically, the pre‑Budget week for the Nifty50 has been muted to slightly weak, Budget Day itself is typically range‑bound, and the week that follows often sees a drift. During the same period last year, however, the Nifty 50 broke this pattern with a 2.9% pre‑Budget rally, the strongest in the past 15 years. With several key index constituents such as ITC, Maruti, L&T, and Axis Bank set to report their Q3 earnings next week, we have a fair chance of a pullback, especially as we are entering this phase on a low base.
How tough is trading going to be on Budget day because of the Sunday factor?
Looking at the last 15 years data, weekend‑adjacent Budgets have shown thinner liquidity (Budget Day volume ~85% of the prior day vs ~128% on weekdays), a weaker Budget Day on average (–0.66% vs +0.45%), and a slightly worse one‑week drift (–1.53% vs –1.39%). This weekend analogue suggests that trading activity could be lower, even though we lack Sunday observations specifically. Either way, traders are likely to go in assuming continuity of policies and incremental reforms. This raises the potential for positive surprises, especially as we are presently on a downtrend.
Kalyan Jewellers shares fell 21% in the week amid speculative news around mutual fund selling. Do you see a bounce ahead?
Kalyan Jewellers has been trading under the 200 day SMA for over one year now. At present, the stock is about 30% away from this key benchmark, the farthest it has ever been. With oscillators oversold, this presents an ideal set up for a relief rally aiming 440-458, riding on mean reversion moves, in the near term. Alternatively, since directional momentum indicators are still strong, inability to consolidate in the 370-340 region, could pave the way for the next wave of downsides aiming 250.
Realty stocks were the biggest loser in the week. What does the chart indicate – more pain or relief rally?
The Nifty Realty index appears oversold having undergone a steep turn from the 200 day SMA seen early this month. However, the slippage to a new 52 week low and with many index heavy weights showing more room for downsides, there is a high potential for the index to extend its downtrend. Trendline support is seen at 600, drawn with a three month time frame.
Give us your top trading ideas for the week keeping the Budget in mind
ACE (CMP: 791)
View: Buy
Target: 810 – 850
SL: 764
The stock has been in a corrective phase since mid2025 and now appears to be approaching the 61.8% Fibonacci retracement level, from which a pullback is typically anticipated. Moreover, the 14‑week RSI is in the oversold zone, while the weekly MACD histogram is showing signs of exhaustion near lower levels both indicating the possibility of an imminent rebound. We expect the stock to move towards 810 and 850 in the near term. All long positions should be protected with a stop‑loss below 764.
JYOTHYLAB (CMP: 249)
View: Buy
Target: 258 – 268
SL: 240
The stock has been drifting lower since the beginning of 2025 and is currently in a deeply oversold setup, with the weekly RSI hovering around 20. With the MACD histogram showing early signs of exhaustion at lower levels and daily candlestick patterns attempting a pullback, the probability of a rebound appears to be increasing. We expect the stock to move towards 258 and 268 over the next few weeks. All long positions should be protected with a stop‑loss below 240.
