Pre-Market: Sensex Drops 1,546 Pts, Nifty Slumps 1.96% on Budget Day

Following a significant sell-off during a rare Sunday trading session on 1 February 2026, which coincided with the release of the Union Budget 2026–2027, Indian equity markets move into the following session.

Benchmarks finished the special session with their worst Budget Day performance in six years as investors responded to increased transaction costs and a lack of compelling incentives for foreign investment.

Indices opened slightly higher but turned sharply negative as the Budget speech progressed. Selling intensified in the second half, with participation thinning and risk appetite fading.

Yesterday's Market recap

Both headline indices ended the day with steep losses.

• The BSE Sensex fell 1,546.84 points, or 1.88%, to close at 80,722.94.

• The Nifty 50 declined 495.20 points, or 1.96%, settling at 24,825.45.

Losses were broad-based, with sharp moves across sectors. PSU banks were the worst hit. The sector index fell more than 5.5%. State Bank of India dropped 5.47% during the session.

Metals and energy stocks also came under pressure. Hindalco declined 5.65%, while several energy names closed sharply lower.

IT stocks gained around 0.6%, supported by a proposal to tax share buybacks as capital gains instead of income, a move seen as favourable for cash-rich technology firms.

Infrastructure stocks showed brief strength. PNC Infratech rose 7.79% at one stage after the Budget proposed a 9% increase in capital expenditure, though gains were not sustained across the sector.

STT Changes Impact

The sell-off was triggered largely by changes announced in the Securities Transaction Tax (STT) on derivatives.

STT on futures was raised from 0.02% to 0.05%. On the other hand, STT on options premium was increased from 0.1% to 0.15%.

Concerns about trading expenses and liquidity were brought up by the increased fee, especially in areas that rely heavily on derivatives.

FII-DII Activity and Volatility

The India VIX closed close to 15.09 after rising more than 14%. The increase was a result of increased anxiety and a significant increase in short-term uncertainty after the budget releases.

Institutional flows remained uneven around the Budget session. Ahead of the special trade, Foreign Institutional Investors (FIIs) were net buyers of ₹2,251 crore in cash equities on 30 January, returning to the buying side after a period of caution.

Domestic Institutional Investors (DIIs) moved in the opposite direction, recording net sales of ₹601 crore, following several weeks of steady accumulation.

The absence of fresh incentives for foreign investors in the Budget added to market unease, given sustained FII selling in recent months.

GIFT Nifty & Global Markets

GIFT Nifty was trading near 25,300, indicating cautious positioning following the Budget-day sell-off. Futures activity suggested restraint rather than aggressive risk-taking.

In the US, the S&P 500 slipped 0.43%, along with the Dow Jones (0.36%).

Japan’s Nikkei is also down to 53,322.85. Hong Kong’s Hang Seng fell 2.08%, weighed by property-sector concerns and muted stimulus expectations from China.

No Allocation for Chabahar Port

The Budget also carried implications beyond equity markets.

The Union Budget 2026-27 makes no allocation for the Chabahar port project, reducing funding to zero. This is the first time in nearly a decade that the project has been left out of India’s overseas development outlay.

Bypassing Pakistan-centric routes, India's intentions for economic access to Afghanistan and Central Asia have relied heavily on Chabahar, Iran's sole deepwater port.

India seems to be reducing direct financing but maintaining open diplomatic and technical ties in the absence of new funds.

What To Expect In Today's Market?

Sector-level changes continue to have priority over overall direction when markets reopen. Participants are expected to closely monitor volatility, institutional flows, currency movement, and GIFT Nifty indicators as trade shifts from rapid reaction to interpretation of budgetary policy. It is realistic to state that sentiment is still cautious at the moment.

Sources:

HindustanTimes

Economic Times

Economic Times