The Indian equity markets experienced increased volatility on Sunday, with the Sensex gaining 9 points to reach 82,278, and the Nifty dropping 28 points to settle at 25,291 by 9:24 am. Notably, the Nifty Midcap 100 fell by 0.73%, and the Nifty Smallcap 100 by 1.55%. While most sectoral indices were in the red, sectors like auto, private bank, oil and gas, and consumer durables showed resilience. Nifty metal took a significant hit, declining by 3.10%, while Nifty auto saw a modest gain of 0.30%.
All eyes were on Bharat Electronics, one of the major gainers on the Nifty, as investors anticipated a boost in defense allocation in the Budget. Market analysts pointed out that investors were not expecting significant tax reliefs in this Budget, considering the substantial income tax reductions in the previous year. They suggested that a rise in the exemption for long-term capital gains tax and a fiscally responsible, growth-focused Budget would be well-received by the market. Speculations about exemptions for certain categories of Foreign Institutional Investors (FIIs) from long-term capital gains tax could trigger a rally.
Investor focus was also on defense-related stocks, with expectations of an 8 to 10% increase in defense allocation. The Budget was anticipated to emphasize exports, especially manufacturing exports, and announcements regarding PSU bank mergers and disinvestment in PSUs were awaited. Trading sessions were scheduled as usual on Sunday from 9:15 am to 3:30 pm, but due to it being a settlement holiday, shares bought on January 30 could not be sold on February 1. Market watchers warned of high volatility, with sharp movements likely based on key fiscal policy announcements, capex push, sector-specific incentives, and the fiscal deficit target for FY27, expected around 4.3–4.4% of GDP.
Investors were keen on cues related to debt metrics, deficit outcomes, and planned borrowings for the next year Budget to align with the government’s strategic goals. On January 30, Foreign Institutional Investors (FIIs) made net equity purchases worth Rs 2,251 crore, while Domestic Institutional Investors (DIIs) were net sellers of equities worth Rs 601 crore.
