Market sentiments took a hit as a sharp sell-off gripped Dalal Street, with the NIFTY falling below 24,600 and the Sensex dropping over 1,000 points amid heightened volatility and cautious investor reaction following key announcements in the Union Budget 2026.
India's benchmark indices dropped nearly 3 per cent in the special Budget session on Sunday, marking the second consecutive day of decline. While the Nifty fell below 24,600 and the Sensex dropped over 1,000 points, the broader market also took a hit, with the Nifty Midcap 100 down by 1.83 per cent and the Smallcap 250 index slipping by 2 per cent.
The Nifty 50 decreased by 2.96 per cent to 24,571.75, while the Sensex fell by 2.88 per cent to 79,899.42. The volatility index VIX rose by over 10 per cent on Sunday.
Why did Nifty, Sensex fall?
Finance Minister Nirmala Sitharaman announced during the Union Budget 2026 a hike in the Securities Transaction Tax (STT) on derivatives trades. This proposal aims to curb speculative trading in the high-volume futures and options (F&O) segment. The STT on futures will increase from 0.02 per cent to 0.05 per cent. The impact on options is even greater, with the tax on option premiums set to rise from 0.1 per cent to 0.15 per cent. Additionally, the STT on exercising options will go up from 0.125 per cent to 0.15 per cent.
While everyone expected an announcement, the Finance minister did not mention any major updates during the session. This caused defense stocks to drop. In the document released by the Finance Ministry, the capital outlay for defense was set at Rs 2.2 lakh crore, which is 22 per cent higher than Rs 1.8 lakh crore for fiscal 2026.
Furthermore, the shares of public sector banks also declined on Sunday, which was led by losses in Bank of India, Bank of Baroda and Indian Bank, after the Finance minister laid out plans to set up a new panel to review the banking and finance sector.
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Moreover, no announcements were made for an increase in FLL limit, which was an expectation by the market.
Stock open on a Sunday
As the Union Budget is being presented on Sunday, February 1, both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are open for a special live trading session. Markets are operating during regular hours. This setup lets investors respond in real time to the finance minister’s speech and the following policy announcements.
