Sensex falls over 1,600 points after Union Budget 2026 as STT hike shocks markets; defence and realty stocks drop while infrastructure, healthcare, and tech rally on ₹12 lakh crore capex boost. Get live updates, key stock reactions, and expert analysis on Sensex, Nifty, and sectoral performance.
New Delhi: In a dramatic market reaction to Finance Minister Nirmala Sitharaman’s Union Budget 2026, India’s stock markets fell sharply during the special Sunday trading session on February 1, 2026. The BSE Sensex dropped 1,649.86 points to 80,619.92, nearly a 2% fall, while the NSE Nifty 50 slid 481.90 points to 24,838.75.
The fall was mainly due to a steep hike in Securities Transaction Tax (STT) on derivatives, causing broad-based selling. Small-cap and mid-cap indices fell 3% and 2%, respectively. However, some sectors like infrastructure and healthcare gained on announcements of higher capital expenditure (capex) and targeted policy support.
Market Opening and Volatility
The Budget, presented at 11:00 AM IST in Parliament, aimed at fiscal discipline, targeting a 4.4% fiscal deficit for FY26, but markets were disappointed by the lack of bold tax reliefs and higher defence spending. Trading opened flat, but volatility surged after announcements. The Sensex fell 500 points from its day high, and the Nifty dropped below 25,100. By 12:34 PM, partial recovery left the Sensex down 700–1,000 points, reflecting investor disappointment amid ongoing foreign institutional investor (FII) outflows.
STT Hike and Tax Changes: Market Dampener
The main reason for the crash was the STT increase on derivatives trading, which analysts say will reduce retail frenzy in futures and options but affect earnings for exchanges and brokerages.
• Futures contracts STT: 0.02% → 0.05%
• Options premium STT: 0.10% → 0.15%
• Options exercise STT: 0.125% → 0.15%
This caused a 6% drop in the Nifty Capital Markets index, with BSE Ltd. and Angel One falling up to 10%.
Other tax measures included:
• Capital gains tax on share buybacks applied to all shareholders
• FEMA rules review to modernize foreign investment
• NRI equity limit expansion under Portfolio Investment Scheme
• Introduction of total return swaps on corporate bonds
While these moves aim to strengthen capital markets, the STT shock dominated market sentiment.
Defence and PSU Stocks Disappoint
Defence stocks were hit hard as capital allocation fell short of expectations:
• Nifty Defence index down 9% to 7,458.65
• Bharat Electronics Ltd. (BEL): -10%
• Bharat Dynamics Ltd. (BDL) & GRSE: -14%
• HAL, Mazagon Dock, Paras Defence: fell sharply
Realty shares fell due to absent incentives, while REITs benefited slightly from urban infrastructure announcements. PSU banks also declined; for example, Bank of India fell after a committee was announced to review the sector.
Other losses included:
• Hindalco Industries: -6%
• Carbon capture stocks: lower despite ₹20,000 crore allocation
At their lowest, all 16 major sectoral indices were in the red, showing a risk-off mood.
Capex Boost Powers Infra, Tech, and Healthcare
Not all sectors were affected. The ₹12 lakh crore capex hike (10% YoY) supported infrastructure and technology:
• Infrastructure: L&T (+5%), CG Power (+5%), Adani Ports (+4%), PFC & REC (+4%)
• Technology & Manufacturing: Tax holiday until 2047 for foreign cloud companies boosted Anant Raj Industries & E2E Networks (+7%)
• Electronics components: ₹40,000 crore & Semiconductor Mission 2.0 lifted Dixon Technologies & Kaynes Technology (+7%)
• Healthcare: Max Healthcare & Apollo Hospitals (+4%) on medical tourism hubs and caregiver training
• Pharma: ₹10,000 crore BioPharma SHAKTI initiative
Other winners:
• Tourism: Thomas Cook & Easy Trip Planners (+11%) after TCS on overseas packages cut to 2%
• Rare earth miners: GMDC & Orissa Minerals (+7%) on dedicated corridors
• Textiles: KPR Mill & Arvind rallied on mega parks
• Railways: stocks climbed ~3% on seven high-speed corridor announcements
Expert Verdict
Experts described the Budget as “cautious continuity”, focusing on fiscal stability over populist measures, with mixed market reactions:
• STT hike: will reduce volatility but create short-term pain for retail traders
• Buyback tax change: seen as taxpayer-friendly
• Debt-to-GDP focus: positive in medium term
• PROI equity limits: increased for liquidity
Private banks gained slightly; PSU banks slipped on reform signals. Analysts highlighted long-term growth drivers like digital hubs and manufacturing, suggesting selective buying in infra and tech.
What Investors Should Watch
• Capex-driven growth may stabilize markets in the long term
• Short-term volatility likely due to STT adjustment and Q4 earnings
• Defence stocks may recover if global tensions rise
• Infrastructure and electronics manufacturing (EMS) stocks may continue gains
Stock ideas to watch: L&T, Dixon Technologies, Max Healthcare. Avoid heavy exposure to derivatives-focused stocks until STT impact settles.
Trading closes at 3:30 PM IST, and final numbers will reveal the full impact. Stay tuned for updates on Sensex and Nifty reactions to Union Budget 2026.
