Stock Market Today: Sensex and Nifty Turn Volatile on Union Budget 2026 Announcements

MUMBAI: The Indian equity markets witnessed a dramatic “rollercoaster” session during the special Sunday trading session on February 1, 2026. While the Sensex and Nifty 50 started the day with optimistic gains, the benchmarks soon pared their early advance. By the time Finance Minister Nirmala Sitharaman concluded her ninth consecutive Budget speech, the Sensex had plunged over 1,600 points from its intraday peak.

This sharp decline left the Nifty 50 struggling to hold the 24,800 mark. Investors reacted sharply to specific tax proposals despite a record ₹12.2 lakh crore allocation for capital expenditure. The high-volume volatility underscores the sensitivity of Dalal Street to policy shifts during the annual fiscal exercise.

The primary catalyst for the afternoon sell-off was the surprise hike in the Securities Transaction Tax (STT). The government proposed increasing the STT on commodity futures from 0.02% to 0.05%. This move directly impacts high-frequency traders and institutional players by raising the cost of transactions. Consequently, shares of major exchanges like the BSE and MCX hit lower circuits, falling nearly 10% within minutes.

Furthermore, a significant bout of profit booking emerged at higher levels. Earlier in the morning, the Sensex had climbed to an intraday high of 82,726.65, rising nearly 457 points. Investors chose to lock in these gains as the Finance Minister moved into the finer details of the “New Income Tax Act, 2025.” The transition to this new regime created an atmosphere of cautious indecision among retail and HNI investors alike.

The India VIX, often called the “fear gauge,” surged by over 14% to reach 15.28. This spike indicates heightened nervousness regarding short-term market stability. Historically, Budget days see intraday fluctuations of 2–3%, and 2026 proved to be no exception. Additionally, the Nifty Metal and PSU Bank indices were among the worst performers, with some PSU banks tanking 5% as the market digested the 4.3% fiscal deficit target for FY27.

While domestic policy took center stage, global factors also weighed on sentiment. Muted cues from Asian markets and rising geopolitical tensions in the Middle East kept the upside capped. Moreover, the strengthening US dollar has led to consistent foreign institutional investor (FII) outflows in recent weeks. This “perfect storm” of domestic tax tweaks and global uncertainty forced the indices into the red by mid-afternoon.

Despite the broader market slump, certain sectors showed resilience. Healthcare and Pharma stocks gained traction following announcements of five new regional medical hubs. Similarly, Auto stocks, particularly those in the EV segment, traded in the green as the government renewed its focus on green energy. However, the IT sector lagged due to concerns over global growth and higher U.S. bond yields.

The Union Budget 2026 aims for a $5 trillion economy through “Viksit Bharat” initiatives. While the long-term infrastructure push is positive, the immediate market reaction reflects a “wait-and-watch” approach. Analysts suggest that the market may take a few sessions to fully price in the tax changes and the shift toward the debt-to-GDP ratio as a primary fiscal indicator.

(This is based on the Market Reaction and not the view of ITW)