Stock market traders are keenly aware the finance minister has a tough time ahead of him on budget day, but so far, they’ve been reluctant to bet against him pulling a rabbit out of his hat.

Given the well-known difficulties the government faces in expanding the fiscal deficit, there has been a remarkable reluctance by the bears, who were badly burnt after the election results, to build up short positions ahead of the budget. That is why the rollover in Nifty futures was so low.

As a note by Anagram Securities Ltd points out, “Short side traders are wary of losing money on a positive budget, like they lost it on election results. If the budget is positive, there will be a rush to close long derivative positions and if it disappoints, there won’t be a buying support which usually exists from short sellers.” That means the downside risk in case the budget disappoints is high. Read more