The Indian stock market is bracing for a tentative recovery on Monday, with benchmark indices Sensex and Nifty 50 anticipated to open higher. This comes as a respite following the dramatic crash witnessed during Sunday's special trading session, which was directly triggered by the Union Budget 2026 proposals. However, market analysts caution that volatility is likely to remain elevated as investors continue to digest the budget's implications.
Recap of Sunday's Market Carnage
The special trading session on Sunday turned into a bloodbath for Indian equities after the budget announcement proposed an increase in the Securities Transaction Tax (STT) on Futures & Options (F&O) trading. The Sensex plummeted a staggering 1,546.84 points, or 1.88%, to close at 80,722.94. Similarly, the Nifty 50 nosedived 495.20 points, or 1.96%, settling at a low of 24,825.45.
Sandeep Das, MD & CEO of Centrum Wealth, provided a nuanced perspective on the budget's impact. "While the lack of immediate consumption stimuli and increased transaction costs in financial markets (increase in STT) may pose challenges in the near term. This budget has been a balancing act, given the fiscal constraints. Here onwards, RBI’s role in implementing liquidity measures to stabilise borrowing costs and support the bond markets will be a key monitorable," he stated.
Key Global Market Cues Influencing Sensex Today
Asian Markets Present a Mixed Picture
Asian markets were trading mixed on Monday morning. Investors were cautiously awaiting China's factory activity data. Japan's Nikkei 225 managed a modest gain of 0.13%, with the Topix index rising 0.52%. In contrast, South Korea's Kospi index witnessed a significant decline of 2.5%, and the Kosdaq plunged by 3%. Futures for Hong Kong's Hang Seng index pointed towards a lower opening.
Gift Nifty Signals a Positive Start
Providing a positive signal for the Indian market, the Gift Nifty was trading around the 24,902 level. This represents a premium of nearly 49 points from the Nifty futures' previous close, strongly indicating a higher opening for the domestic benchmark indices.
Wall Street Ends the Week in the Red
US stock markets closed lower on Friday. The decline was partly attributed to investor reaction to President Donald Trump's nomination of former Federal Reserve Governor Kevin Warsh, which was perceived as a hawkish move. The Dow Jones Industrial Average fell 179.09 points (0.36%) to 48,892.47. The S&P 500 declined 29.98 points (0.43%) to 6,939.03, and the Nasdaq Composite dropped 223.30 points (0.94%) to 23,461.82.
For the week, performance was mixed: the S&P 500 rose 0.3%, while the Dow fell 0.4% and the Nasdaq declined 0.2%. On a monthly basis, all three indices posted gains: the S&P 500 rose 1.4%, the Nasdaq gained 0.9%, and the Dow Jones rallied 1.7%.
Japan's Economic Indicators
In positive news from Japan, the country's manufacturing activity expanded at its fastest pace in approximately three and a half years during January. The S&P Global Japan Manufacturing Purchasing Managers' Index (PMI) rose to 51.5 in January from 50.0 in December, marking its strongest level since August 2022.
Conversely, Japanese government bonds (JGBs) faced selling pressure, leading to a rise in yields. The 20-year JGB yield climbed 2.5 basis points to 3.2%, while the five-year yield increased by a similar margin to 1.680%.
Currency and Commodity Movements
The US dollar index held steady at 97.22 after a 1% jump on Friday. The Japanese yen weakened by 0.4% to 155.39 per dollar. The Euro was last seen at $1.1848, while the British Sterling was down 0.05% to $1.3680.
In the commodities space, gold prices extended their fall, pressured by a firm US dollar, although silver prices managed to recover from a more than three-week low. Spot gold price fell 1.5% to $4,793.97 per ounce, while US gold futures for February delivery climbed 1.6% to $4,818.10 per ounce. Spot silver price rose 1.6% to $85.98 an ounce.
On the Multi Commodity Exchange (MCX) in India, gold and silver futures witnessed sharp declines on Sunday. The MCX gold rate for April futures ended lower by ₹4,242 (2.87%) at ₹1,48,104 per 10 grams. The MCX silver price for March futures expiry closed at a 9% lower circuit of ₹2,65,652 per kg, down by ₹26,273.
Crude Oil Prices Tumble
Crude oil prices fell by over $1 per barrel. The decline was triggered by comments from US President Donald Trump over the weekend, where he indicated that Iran was "seriously talking" with Washington. Brent crude futures fell 2.7% to $67.48 per barrel, while US West Texas Intermediate (WTI) crude price declined 2.8% to $63.41 per barrel.
The Indian stock market's trajectory on Monday will hinge on the delicate balance between domestic budget repercussions and these complex global cues, with heightened volatility expected to be the dominant theme in the near term.
