Dangerous time to bet on stocks before budget

A few days before the Union Budget has always proved an exciting time for traders to bet on stocks. If an excise cut on automobile stocks is expected than traders take long positions in auto stocks. On the other hand if there is a slight inkling that export sops would be provided than traders lay bets on export oriented companies.

The budget is the most exciting period for the trader, during the entire year, as the volatility can easily fetch gains of between 10 and 30% roughly and similarly with losses.

However, trades are based more on guesswork and rumours and hence the chances of losing money is high, if your long and the requisite policy decision that you traded on has not materialised. This time round many sops may not go through and hence trading on stocks based on hearsay can lead to losses.

Analysts are warning that this time budget will be tough and goodies for many sectors may simply not go through. This is because that the government's finances are in a disarray with fiscal deficit to be at least one percenatge point over those projected in last year's budget.

Therefore, for traders and those engaged in speculation it is the best time to “look before you leap”.

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