Explained: Why Indian Markets Bounced Back After Budget Day Bloodbath

Indian equity benchmarks recovered substantially on Monday, clawing back a part of the heavy losses suffered on Budget Day, aided by value buying in large-cap stocks and a decline in global crude oil prices.

The Sensex ended the session at 81,666.46, gaining 943.52 points or 1.17 per cent, while the Nifty closed at 25,088.40, up 262.95 points or 1.06 per cent.

The rebound followed a sharp sell-off during the Union Budget 2026–27 presentation on Sunday, when markets reacted negatively to proposals aimed at curbing speculative trading. On Budget Day, the Sensex had plunged 1,843.43 points, or 2.23 per cent, to close at 80,722.94, while the Nifty fell 593.45 points, or 2.33 per cent, to 24,825.45.

Market sentiment had turned sharply cautious after Finance Minister Nirmala Sitharaman proposed an increase in the Securities Transaction Tax (STT) on futures and options trading, triggering aggressive selling across sectors, particularly in stocks linked to derivatives-heavy activity.

Vinod Nair, Head of Research at Geojit Investments Limited, said the recovery reflected confidence in the broader policy direction outlined in the Budget. He noted that continuity in growth-focused policies and fiscal discipline had reinforced medium- to long-term earnings expectations.

Nair also pointed to the sharp fall in global crude oil prices as a supportive factor, citing signs of easing geopolitical tensions between the United States and Iran. However, he cautioned that near-term sentiment could remain subdued due to weaker-than-expected third-quarter earnings and persistent global uncertainties.

Echoing a cautious outlook, Ponmudi R, CEO of Enrich Money, said markets opened the week with a measured rebound as investors recalibrated positions following the Budget-triggered sell-off.

“Selective value buying in large-cap names provided some near-term stability, but overall sentiment remains guarded amid elevated volatility,” he said, adding that market direction will hinge on global macro cues, clarity on Budget execution, and a revival in institutional risk appetite.

The government has defended the STT hike as a necessary step to curb excessive speculation in derivatives markets. According to official estimates, the volume of futures and options trading is more than 500 times India’s GDP, prompting concerns over systemic risk.

Under the proposal, STT on futures trades will rise to 0.05 per cent from 0.02 per cent. For options, STT on the premium and exercise of contracts will increase to 0.15 per cent from the existing 0.1 per cent and 0.125 per cent, respectively. Other STT rates remain unchanged.

While the tax increase directly raises trading costs, especially for frequent traders, hedgers, and arbitrageurs, market participants are now weighing its long-term impact against the government’s broader push for stability and sustainable growth.

(With inputs from ANI)