DeepDive Week 5, 2025: Union Budget’25 gave surprise to the middle class. Focus on domestic consumption.
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Market Breadth
The stock market remained muted during the week, witnessing reduced selling pressure. As an exception, market remained open on Saturday, for the most awaited event. Union Budget, 2025!
Before we look at the Union Budget, let’s analyze the breadth of the stock market, in comparison to the previous week’s close (Week 4)
Stocks trading above 200DMA: has grown marginally from 30% to now 32%. For most stocks the long term average line (200DMA) is acting like resistance, as major indices are also trading below their long term averages. As traders, we need to see this number atleast cross the ‘50-60’ range, to indicate Bears are losing their grip.
Stocks trading above 21DMA: has nearly doubled, from 15% to now 30%. This is primarily because of the technical bounce in small/mid caps from an oversold territories.
As per our Trading Rules, that are based on the experience of world’s legendary traders, the major indices continue to trade below 200DMA, and for swing/positional traders it is a NTZ (No Trade Zone). We had discussed about this ‘Rule’ in our previous weekly post (read now to refresh your memory).
During the week, some stocks witnessed significant price action, primarily due to surprise Q3 results. Such price actions will entice you to break the Rule. At that point, you view things from a wider perspective. Zoom out! You will understand that current market scenario is unfavorable for trading as overall indices are weak i.e. in NTZ.
As a Trader, you need a ‘trend’, before you take entry. That ‘trend’ is missing. Therefore, wait for the confirmation of trend. It is tough! But only a step in the direction to achieve success in your Trading Hikes!
“Trading in stocks below their 200DMA, is like hiking on Avalanche prone snow mountain. An inch of movement can trigger the whole ice slab to fall, burying you under 50ft ice.”
Market Breadth at the end of Week 5, 2025. (Courtesy: ChartInk)
UNION BUDGET, 2025: Highlights
1. Surprise Announcement for the Middle Class:
Budget provides great relief to the middleclass, as now, no income tax is payable on income upto Rs. 12 lakhs. For the salaried class, with increased standard deduction of Rs. 75,000 (under New Tax Regime), no tax liability will arise till Rs.12.75 lakhs.
It's impact? This is a great push to boost domestic consumption & investment, by increasing the disposable income in the hands of salaried class. Govt exchequer will forego Rs. 1 lakh crore of tax revenue. Simpliciter, the Govt has realised it's past mistakes. This is a great way to accept it, and patch up & heal the wounded middle-class.
Sectors that benefit from this Budget: if the thesis of boosting domestic consumption works as intended by Union Budget’25, following sectors are likely to enjoy the fruits:
Fast Fashion, Apparel & Jewellery
Quick Commerce/Food Delivery/Quick Service Restaurants (QSR)
Travel & Hotels
Consumer Durable & Semi-Conductor
Automobile
Insurance
Real Estate & Affordable Housing
FMCG
As a Trader, more if you are a ‘Positional Trader’, you should analyze such policy changes, and their impacts on the sectors. Once you have filtered the sectors (like, we have picked some of the sectors above), now it’s time to find the top-pedigree stocks from each such sector. Build a watchlist, and start tracking them. Don’t jump and buy! Notice their price movements and see if you can pick some cues.
Remember, the 200DMA Rule. You don’t trade when major indices are trading below 200DMA i.e. their long ter, averages.
Nirmala Sitharaman, Finance Minister of India presented the Union Budget’25.
2. Government's Focus:
Although this Budget shows clear intent of the Government to use domestic drivers to boost the consumption and demand, that remains subdued; there are other areas of focus in this Budget, as briefly listed below:
100% FDI in Insurance Sector is approved. 'Insurance for All' by 2047;
Ease of doing business. Viksit Bharat - Financial access to agriculture farmers, MSME & exports;
Rationalization of income tax slabs;
Rs.11.21 trillion capex for infrastructure;
Impetus to Electronics Manufacturing by reducing import duty on key components. Imported TV & mobile phones to cost cheaper with reduced BCD. Increased PLI for mobile phones and semi-conductor manufacturing;
Fiscal Deficit to be kept range bound 4.4-4.8% of GDP;
Jal Jiwan Mission- Drinking water & sanitation (1.5x increase since last budget);
20k Crore allocated for Nuclear Energy;
Improving fisheries sector;
Others areas of focus like : developing 50 tourist destinations; 50k Atal Tinkering Labs in next 5yrs to boost innovation; skill education; promote women entrepreneurship; strengthening healthcare infra; BCD exemption to ship building/breaking industry; focus on new technologies (AI, IOT etc.); SWAMIH Fund allocation of Rs. 15k Cr. for stalled residential projects.
Deep Dive into Indices
It’s time for the interesting part. Charts!
Let’s examine the technical charts of major Indices, and analyse their closing levels during this week (after the release of Union Budget’25). This should give you more clarity about the rule, and where to focus more when things improve in coming week/months. All clues are in the price action.
Indices that gave a closing ‘above’ their 200DMA:
NIFTY IT
NIFTY CONSUMPTION
NIFTY FMCG
Nifty IT Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading above 200DMA. Keep eye on the narrow consolidation range. Will it breakout or breakdown?
Nifty Consumption Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading above 200DMA, after reaction to the Budget Announcement. Keep an eye here!
Nifty FMCG Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading above 200DMA, after reaction to the Union Budget announcement.
Indices that gave a closing ‘at or below’ their 200DMA:
NIFTY500
NIFTY BANK
NIFTY MIDCAP
NIFTY SMALLCAP
NIFTY REALTY
NIFTY PHARMA
NIFTY AUTO
Nifty500 Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading below 200DMA.
Nifty Bank Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading below 200DMA.
Nifty Midcap Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading below 200DMA.
Nifty SmallCap Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading below 200DMA.
Nifty Realty Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading below 200DMA. Look at the sharp fall below 200DMA.
Nifty Pharma Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading just at its 200DMA. Let’s examine in coming week, if it can sustain above 200DMA.
Nifty Auto Index: Price Chart on daily timeframe. (Source: TradingView). Current week’s close is just at its 200DMA. Notice 5 consecutive green candles during the week? Let’s examine in coming week, if it can push above 200DMA. Keep an eye here!
Now, let us look at the heavyweight index. NIFTY50.
Nifty50 Index: Price Chart on daily timeframe. (Source: TradingView). Currently trading just below it’s 200DMA (yellow), however, above it’s 21DMA (blue). Let’s examine the following week, if it can re-capture the 200DMA, as well as medium term MA (50DMA-red).
HOMEWORK EXERCISE
As per Trader Hikes’ Rule (THR), no fresh trading position is to be initiated as long as Nifty50 & Nifty500 Indices trade below 200DMA. No sustained move is expected till then, rather can hurt a Trader by chopping & volatile action.
Build your Watchlist of Stocks: Stay on the sidelines, and focus on building a watchlist of stocks. How can you find that?
Stock which are trading above 200DMA, preferably above 50DMA, are the ones where you should focus. When the Indices improve and resume the uptrend, these are the stocks that can likely give a solid runup.
Find leading stocks from sectors/themes, as discussed above in the post (that have been laid emphasis upon, in this Union Budget).
That’s a wrap! See you in the next week’s Deep Dive hike.
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