Indian markets rebound after budget shock
Equities recover sharply after Sunday’s rout as fears of foreign selling fade; bond yields stay elevated while gold and silver swing wildly
Last Updated: Feb 02, 2026, 17:58 IST3 min
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Indian equity markets staged a strong rebound on Monday, clawing back a substantial portion of the losses from the brutal sell-off a day earlier. After an unnerving Budget Day session on Sunday that triggered panic across Dalal Street, investor confidence returned, pushing key indices higher through the day.
The Nifty 50 closed at 25,088, up 1.06 percent, while the broader Nifty Midcap100 ended at 57,667, up 0.96 percent, signalling that the recovery was not restricted to large-cap stocks alone.
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Market veteran Ambareesh Baliga summed up the turnaround neatly: “The market probably saw selling by domestic investors yesterday in anticipation of a sell-off by foreigners this morning. When that didn’t happen, there was a recovery through the day.” His comment captured the essence of Monday’s move — a relief rally driven largely by the absence of the feared global follow-through selling.
Sunday had been an unusual and unsettling session. Markets were kept open to react immediately to the Union Budget 2026, and the reaction was overwhelmingly negative. Higher-than-expected government borrowing numbers, changes to capital gains taxation, and an increase in securities transaction tax on derivatives triggered heavy selling across sectors. The Nifty 50 and the Nifty Midcap100 both fell sharply, erasing weeks of gains in a matter of hours as traders rushed to cut risk.
Adding to the anxiety was the fact that global markets were shut on Sunday. With no international cues to lean on, Indian investors reacted in isolation to the Budget announcements. Many feared that once foreign investors got a chance to respond on Monday, the selling pressure could intensify further. That expectation led to aggressive liquidation by domestic institutions and high-net-worth investors, deepening the rout.
A major overhang was the government’s gross borrowing estimate of ₹17 lakh crore for the next financial year. Bond markets viewed the figure as uncomfortably large. The benchmark 10-year government bond yield jumped to 6.78 percent, reflecting concerns that the heavy supply of government bonds would push interest rates higher. Analysts warned that elevated yields could raise the cost of capital for companies.
But Monday’s session played out very differently. With no significant negative signals from overseas investors and with valuations suddenly looking attractive after Sunday’s fall, buyers stepped back in. Domestic mutual funds and long-term investors used the dip to accumulate quality stocks, while traders who had taken short positions hurried to book profits. By afternoon, the recovery had broadened to mid-caps and small-caps.
Even as equities found their footing, the broader financial landscape remained anything but calm. Gold, silver, and other commodities were extremely volatile, adding to the sense of uncertainty. Precious metals, which had enjoyed a spectacular rally through January, saw sharp reversals over the weekend as global traders reacted to a stronger US dollar and shifting expectations on international interest rates.
On the Multi-Commodity Exchange, prices swung violently. Gold traded in a wide band around ₹1.43-1.47 lakh per 10 grams, well off its recent peaks, while silver hovered near the ₹2.50 lakh per kilogram mark after several days of intense selling pressure. Internationally, too, the moves were dramatic: spot gold fluctuated around $4,789 an ounce, while silver oscillated near $86 an ounce.
The extreme moves were likely driven as much by technical factors as by fundamentals. Margin calls, exchange requirement changes, and the unwinding of leveraged positions amplified price swings, turning what had been a one-way rally into a volatile two-way price fluctuation.
As the day ended, there was a sense of relief that the immediate post-Budget panic in equities had eased. Yet few were willing to call it the start of a fresh bull run. With bond yields elevated and commodities still whipsawed by global forces, investors remained cautious.
First Published: Feb 02, 2026, 17:58
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