Union Budget 2026 Delivers Worst Market Performance in Six Years as Nifty Crashes 2%
In what investors had hoped would provide a much-needed boost to the Indian stock market following a period of significant volatility, today's Union Budget instead triggered the weakest budget-day market performance witnessed in six years. This outcome underscores the persistent uncertainty that continues to grip financial markets across the nation.
Steep Decline in Key Indices
The benchmark Nifty 50 index suffered a dramatic 2% crash, plummeting by approximately 500 points to close below the critical psychological level of 25,000, settling at 24,825 points. This marks its most dismal budget-day performance since 2020, when it had plunged by 2.25%. Today's severe downturn has also dragged the index to its lowest point in four months, representing a substantial 6% decline from its January peak of 26,373 points.
Historical context reveals that over the past quarter-century, the Nifty 50 has closed with losses exceeding 2% on only four occasions. The most severe crash occurred in 2009, recording a staggering 5.8% fall, as reported earlier by Mint. All major sectoral indices closed in negative territory, with the Nifty PSU Bank index experiencing the most significant drop at 5.57%. This was closely followed by the Nifty Metal, Nifty Oil & Gas, Nifty FMCG, and Nifty Auto indices, each shedding over 2% of their value.
Three Major Factors Behind the Sharp Sell-Off
The broad-based market sell-off was primarily triggered by the government's proposal to increase the securities transaction tax (STT) on equity futures from 0.02% to 0.05%, as announced in the Budget presented in Parliament. Additionally, the tax on options premiums and on the exercise of options would be raised to 0.15%. While these measures are intended to curb speculative trading activities, several market experts believe they could potentially discourage foreign investor participation in the near term.
Foreign institutional investors, who have already maintained a net selling stance, have withdrawn up to $22 billion since January of the previous year. This sustained outflow has also contributed to pushing the Indian rupee to multiple record lows against major global currencies. The announcement of the STT hike sent shockwaves through capital market-related stocks. Furthermore, the government's decision to tax buyback proceeds for all types of shareholders as capital gains added to the negative sentiment.
Another critical factor that spooked market participants was the increase in the government's borrowing limit to a historic high of ₹17.2 lakh crore. This development triggered a widespread sell-off across banking stocks, particularly affecting state-owned banks. Moreover, the market had anticipated the government to announce major economic reforms in response to higher US tariffs and to introduce measures aimed at attracting overseas investors. However, the Budget fell short of these expectations, further damaging investor sentiment.
Positive Aspects Amid the Turmoil
On a more positive note, the government's Budget focused on bolstering the manufacturing sector through higher allocations for semiconductors, electronics, biopharma, automotive industries, and critical minerals. It also maintained the fiscal deficit target at 4.3% and allocated a record ₹12.2 lakh crore for capital expenditure, which exceeded market estimates.
Technical Analysis and Market Outlook
Ponmudi R, CEO of Enrich Money, observed that the Nifty index decisively broke below the crucial 25,000–24,900 support band and swiftly descended to an intraday low near 24,572 points. The subsequent rebound toward the 25,150 zone lacked conviction, highlighting weak follow-through buying amid elevated volatility. Fresh selling pressure re-emerged, dragging the index back below the 25,000 psychological level into the 24,700–24,800 range.
From a technical perspective, he noted that the Nifty is now consolidating below its earlier breakdown area, indicating a clear sell-on-rallies structure in the near term. As long as the index remains below the 25,200–25,300 resistance band, the market bias is likely to stay cautious to bearish. Only a sustained move back above 25,300 would neutralize the current negative undertone and signal short-term stabilization.
Aakash Shah, Technical Research Analyst at Choice Equity Broking, stated that the immediate support for the Nifty 50 lies between 24,500 and 24,400 points, while resistance is placed in the 25,000–25,150 zone. A decisive move above 25,150 could potentially open the path toward 25,550 points.
Disclaimer: This story is intended for educational purposes only. The views and recommendations expressed above are those of individual analysts or broking companies and do not represent the stance of Mint. Investors are strongly advised to consult with certified financial experts before making any investment decisions.
