Indian equity markets witnessed a sharp sell-off on Budget Day as investors reacted cautiously to the Union Budget announcements by Finance Minister Nirmala Sitharaman. The benchmark indices, Sensex and Nifty 50, slipped deep into the red during intraday trade, weighed down by a mix of policy concerns, global cues, and sector-specific pressure.
Here are eight key reasons why the stock market remained under pressure:
1. Increase in STT for F&O SegmentThe hike in Securities Transaction Tax (STT) for futures and options trading dampened sentiment in the derivatives segment. This move is expected to raise trading costs, impacting volumes and broker stocks.
2. No Major Announcement on Defence SpendingMarkets were expecting stronger policy support and higher allocations for the defence sector. The absence of major announcements led to disappointment among investors, triggering selling pressure in defence-related stocks.
3. PSU Banks Tumble on FII Limit ExpectationsPublic sector bank stocks declined after expectations of an increase in foreign institutional investor (FII) limits and value unlocking failed to materialise, leading to profit booking in the sector.
4. FY27 Capex Guidance Below Analyst EstimatesThe government’s capital expenditure outlook for FY27 came in lower than market expectations, raising concerns over infrastructure growth momentum and impacting capital goods and construction stocks.
5. Volatility in Metals and Weak Global SentimentVolatility in global metal prices and subdued international market cues added to domestic market nervousness, particularly hurting metal and mining stocks.
6. No Major Surprise in January GST CollectionsThe absence of a positive surprise in January GST numbers failed to lift sentiment, as markets had priced in stronger revenue growth expectations.
7. Rupee Remains WeakThe continued weakness in the rupee against the US dollar further weighed on investor confidence, especially in import-dependent sectors.
8. Overhang of US-India Trade Completion RemainsUncertainty surrounding the progress of the US-India trade agreement continued to act as an overhang, limiting risk appetite among investors.