A powerful wave of risk-off sentiment swept through global financial markets on Monday, triggering declines across stocks, commodities, cryptocurrencies, and bonds. Investors worldwide grappled with a combination of domestic policy uncertainties and tightening global financial conditions, leading to a synchronized selloff.
Indian Stock Market: Budget Overhang and Volatility
The Indian stock market remained highly volatile, with the Sensex and Nifty 50 oscillating between gains and losses. This followed a sharp selloff on February 1, where both benchmarks plunged nearly 2% each, triggered by the Union Budget 2026's decision to raise the Securities Transaction Tax (STT) on futures and options trades. While markets stabilized somewhat during Monday's session, the underlying weakness persisted.
Investors continued to assess the Budget's broader implications, expressing caution over the absence of strong measures to attract foreign capital and concerns surrounding the fiscal math after the government announced a higher-than-expected gross borrowing programme.
"We expect the market to remain subdued in the near term amid weak investor sentiment. Attention is likely to shift from headline announcements to the Budget's fine print, upcoming earnings, and global cues," said Ajay Menon, MD & CEO – Wealth Management, Motilal Oswal Financial Services.
Global Equity Markets: Sharp Deterioration in Risk Appetite
Globally, risk appetite deteriorated sharply. MSCI's emerging markets index and emerging Asia index each dropped nearly 3%, marking their steepest intraday fall since November. Asian markets led the losses:
- South Korea's Kospi tumbled over 4%, triggering temporary trading halts.
- Hong Kong's Hang Seng fell 1.64%.
- China's CSI 300 declined 0.68%.
US stock futures also signalled weakness, with Nasdaq-100 futures down nearly 1%, reflecting mounting fears of tighter financial conditions.
Precious Metals: Strong Dollar and Hawkish Fed Fears
Gold and silver prices extended their sharp correction both globally and in India. A stronger US dollar and profit-taking at record highs weighed heavily on sentiment.
- Spot gold plunged 3.3% to $4,703 per ounce after earlier falling over 5% to a two-week low.
- Spot silver slid 5% to $80.28 an ounce.
- MCX gold rate for April futures hit a 6% lower circuit at ₹1,38,888 per 10 grams.
- MCX silver price for March futures crashed 12% to ₹2,33,774 per kg.
The selloff accelerated after US President Donald Trump named Kevin Warsh as the next Federal Reserve chair, replacing Jerome Powell in May. Investors view Warsh as more hawkish, raising concerns that interest rates could remain higher for longer and liquidity conditions could tighten further.
"Gold and silver prices have seen aggressive profit-taking after hitting record highs. The strong dollar has added pressure," said Ajay Kedia, Director, Kedia Advisory, advising investors to avoid fresh bullion trades amid heightened volatility.
Energy Markets: Crude Tumbles on Geopolitical De-escalation
Energy markets were hit hard, with crude oil prices falling over 5%, marking their steepest single-session decline in more than six months. The drop came after Trump said Iran was "seriously talking" with Washington, easing fears of geopolitical escalation involving a key OPEC producer.
- Brent crude oil price slid 5.15% to $65.75 per barrel.
- WTI crude oil price fell 5.26% to $61.78.
- MCX crude mirrored the decline, dropping over 5% to ₹5,670 per barrel.
Natural gas prices also collapsed after forecasts pointed to milder weather conditions in the US. MCX natural gas prices plunged 18%, while US futures dropped as much as 17%.
Cryptocurrencies: Liquidity Fears Hit Risk Assets
Cryptocurrencies extended their losing streak as investors reassessed the outlook for global liquidity.
- Bitcoin prices dropped 4% to $75,660.
- Ether price plunged 10% to around $2,200.
Market participants fear that a more hawkish Federal Reserve under Warsh could shrink liquidity support for speculative assets. Historically, cryptocurrencies have benefited from abundant liquidity and expanding central bank balance sheets, making them particularly vulnerable during tightening cycles.
Currencies and Bonds: Dollar Firms, Yields Rise
A firm US dollar added to pressure across global assets. The dollar index rose 0.10% to 97.08, while an emerging market currency gauge slipped 0.4%.
The Indian rupee, however, bucked the trend, gaining 37 paise to 91.56 against the dollar, aided by the sharp fall in crude oil prices. It had hit a record low of 92.02 in the previous session.
In bond markets, Indian government securities sold off sharply after the Budget projected record borrowing of ₹17.2 lakh crore in FY27. The 10-year benchmark yield rose nearly 8 basis points to 6.76%, as higher supply expectations weighed on prices.
Globally, Japanese government bond yields climbed on expectations of fiscal stimulus and tax cuts, adding to the worldwide rise in yields.
Conclusion: A Classic Risk-Off Phase
The synchronised selloff across asset classes reflects a classic risk-off phase, driven by tighter liquidity expectations, rising yields, a stronger dollar, and policy uncertainty. Until clarity emerges on global monetary policy and domestic fiscal signals, markets are likely to remain volatile and susceptible to further swings.
