The Budget of 2021 has been declared and the market has indicated moving in the uptrend. The budget has given out a signal of a new India. How to trade or invest technically and fundamentally keeping in mind the budget? Let’s find out.
Talking about the budget of 2021, then there is no change in the slabs of Income Tax. Also, the prices of petrol and diesel have been hiked, which has irked the common man. It seems like the petrol pumps have become a source of nothing but a tax collection department for the government. It is said that everything is fair in love and war. The previous year was a tough year for all of us. If the countryʹs income is less than what the country has to spend or if the country’s income is less compared to what the country has to spend, then the gap between it is called the Fiscal Deficit.
Consider there is a company which manufactures pens and the cost of manufacturing a single pen is Rs. 10/-. So if the company manufactures 100 pens annually then 100*10 = 1000, that means the total production of the company is equal to Rs. 1000/-. In this manner, if we add together the total production of all the companies in the country together we get the country’s Gross Domestic Product (GDP). So keeping in mind the Gross Domestic Product, all the nations try to keep their fiscal deficit low. If a country’s fiscal deficit increases then that hampers the country’s rating. Recently, we all faced a tough time, so to beat this tough time, without even thinking about the rating agencies, this budget took the bold steps of spending more than the country’s savings.
When the famous trader and investor Rakesh Jhunjhunwala was asked to give his views about the current budget of 2021, he appreciated this budget. Bypassing the rating agencies, he has also expressed his views saying that the Indian economy will be scaling new heights from the bold steps that are taken in the budget. With the veracity with which India has answered China, seeing this Rakesh Jhunjhunwala says this is what new India looks like.
Coming back to the share market, when Rakesh Jhunjhunwala was asked what signal does the budget give the markets? He replied by quoting the lyrics of a famous Bollywood song saying, “Samajne wale samaj gaye hai, na samje wo anadi hai.” Talking about investments, Rakesh Jhunjhunwala mentions, “For investment, the market is offering a buffet lunch. But you should avoid over-eating here.”
Now, after listening to all such advice, what should be our investment strategy? Technically, till the market is above the level of support i.e. Nifty is above 13596, the market is in uptrend. And fundamentally, the market’s Price Earning Ratio, Price to Book Value Ratio, Dividend Yield Ratio, Market Cap to GDP Ratio, country’s Debt to GDP Ratio all are indicating that the market is expensive.
So technically the market is in uptrend but fundamentally it is expensive, so as mentioned in most of our previous videos, you should create a pyramid of your investments. That means when the market valuation is expensive, invest less and when the market valuation is in-expensive, invest more. But, if we keep on increasing our investments in a step by step manner in this increasing market scenario then our investments will look like an ice-cream cone. And if the market crashes from here, then as our investment was at a higher level here, we will have to face huge losses. Hence, we are supposed to invest less in this expensive market.
Where should we invest currently? After the budget, the market itself has indicated, “Bhaav Bhagwan Che”. The banking sector has rallied after the budget. Thus, if we check the chart of the banking sector which is Bank Nifty, so technically it has indicated moving out of the box. As per the techno-fundamental approach, we can make a limited investment in the share of HDFC Bank.
Do you wish to invest in the shares of HDFC Bank, Kotak Bank, ICICI Bank, Axis Bank, and SBI Bank by paying just Rs. 350/-? Is this possible? Yes, this is possible. Those mutual funds which can be bought and sold like shares in the share market are known as Exchange Traded Funds. So Nippon Bank Bees is one such exchange-traded fund that invests in all these banking shares. So we can buy this as a share at just Rs. 350/- Till the time it is technically above the level of support (Rs. 297/-), it is in uptrend.
On one side where the share market is scaling new heights every day, there has been a fall in the price of gold, so you can also grab the opportunity to invest in gold by paying just Rs. 40/- Like Bank Bees is an exchange-traded fund, similarly Gold Bees is an exchange-traded fund that invests in gold. So we can buy/sell this just like any other share in the share market. You can thus make a limited investment in Gold Bees for the long-term to earn excellent returns. In this way, you can make a limited investment in Bank Bees and Gold Bess to form a pyramid of your investments.
To learn intelligent investing as well as to learn how to form a pyramid of your investments and to find out whether the market valuation is expensive or in-expensive, download the Aryaamoney app today. We regularly update the market valuation in the app. Based on the valuation, how to build up your portfolio, if you want to know then you can subscribe to our new service called Wealth Compounding Machine (Lump-sum or SIP Plan). Also, based on the market valuation, if you want to learn how to carry out short-term or medium-term trading then if you wish to you can also subscribe to our Smart Trader Training Program. If you wish to open your Demat account with India’s leading brokers, then you can check out the link given below.
We would like to give a disclaimer here that all the advice given in this blog is for educational purposes. This is not any kind of buy/sell recommendation. We may or may not have our investment in the companies discussed here. Mr. Bhuushan Godbole, his company as well as the director board of the company has crores of investment in the share market as well as in gold and silver. This is our disclaimer/disclosure. So we’d like to mention this again that invest in the market after thorough analysis and also after discussing it with your financial advisor.
If we observe, then for investment there is a buffet lunch going on in the market currently. You can opt to invest in companies having sustainable competitive advantage along with Bank Bees & Gold Bees to form a pyramid of your investment. Also, note that even though there’s a buffet lunch that is going on there, you shouldn’t overeat and you can go wrong at any moment, otherwise you may blame us. The share market is like a roller coaster ride. But in a roller coaster ride, you tentatively know when the ride is going to go down but when the share market is in uptrend you never know when it may go down. Hence, it is important to form a pyramid of your investments in the share market. Invest less when the market valuation is expensive, invest more when the market valuation is in-expensive.
Until next time…
Happy Trading, Happy Investing!!!
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