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The Union Budget 2026 may have been unveiled just yesterday, but Dalal Street has already delivered its verdict — cautious, unconvinced and still searching for direction. The message came loud and clear on Budget Day, when the Sensex crashed over 1,500 points in its steepest budget-day fall in six years, rattling investors who had hoped for policy cheer amid global uncertainty.

On Monday, the market attempted to steady itself. The Sensex hovered around the 80,000 mark, while the Nifty tested the 24,800–25,000 zone, suggesting that the worst of the knee-jerk reaction may be over — but confidence is far from restored.

By early afternoon, the Sensex was trading near 81,130, up about half a per cent, and the Nifty50 was inching towards 24,940. Yet the gains felt fragile. Volatility ruled the session as investors pored over Budget 2026’s fine print, weighing fiscal discipline against the absence of immediate growth triggers.

The churn was visible across the board. Heavyweights like Titan, Infosys, Trent, Axis Bank and SBI slipped up to 2 per cent, reflecting unease over consumption trends and financials. In contrast, stocks such as Adani Ports, Larsen & Toubro, Reliance Industries, Asian Paints and Power Grid found favour, helped by the government’s steady push on infrastructure and capex.

The broader market, however, told a less reassuring story. Midcap and smallcap stocks remained under pressure, with key indices falling close to 1 per cent — a reminder that risk appetite remains selective and that investors are unwilling to chase valuations just yet.

If there was one announcement that truly unsettled markets, it was the hike in securities transaction tax (STT) in the futures and options segment. While brokerages believe investors will eventually adjust to the higher trading costs, the timing of the move — at a point when foreign investor participation is already weak — has dented sentiment.

The disappointment was deepened by what the budget did not offer. Hopes of relief on long-term capital gains (LTCG) tax were dashed, leaving traders and investors with little in the way of immediate tax comfort. The government, it appears, chose prudence over popularity.

Goldman Sachs described Budget 2026 as “largely academic”, pointing to marginal deficit reduction, continued increases in revenue spending and only a modest rise in capital expenditure. Simply put, the budget asked markets for patience.

Morgan Stanley said the softer fiscal drag and steady capex push were largely in line with expectations, reinforcing its constructive medium-term view on Indian equities. Still, it warned of near-term valuation risks, especially with foreign investor sentiment already fragile and further jolted by the STT hike.

Over time, however, opportunities remain. The brokerage highlighted sectors such as digital infrastructure and data centres, biotechnology, transportation corridors, nuclear energy and critical minerals as areas where long-term capital could flow.

With the Budget now out of the way, analysts believe the market’s focus will quickly shift back to earnings. Jefferies expects FY27 profits to be supported by higher capital expenditure, services-sector growth and increased adoption of artificial intelligence, alongside stronger equity demand through buybacks. It remains overweight on financials, consumer discretionary and industrials.

Motilal Oswal Financial Services struck a balanced note. While acknowledging that the STT hike is sentimentally negative, it expects the actual hit to derivatives volumes to be limited, drawing parallels with past tax increases that failed to derail participation meaningfully. Industry feedback suggests a possible 5 per cent impact on volumes, translating into a modest earnings hit for some market infrastructure players.

At the same time, the brokerage sees second-order winners emerging — from data centre operators and power equipment makers to cooling solution providers and select real estate players. Policy support for global capability centres and tax benefits for data centres could also lend support to REITs.

The decision to keep gold import duties unchanged came as a relief amid speculation of a hike following the sharp rise in prices. But for PSU banks, the budget offered little cheer. Expectations of consolidation moves or a hike in FDI limits went unmet, leaving sentiment subdued.

For now, Budget 2026 has delivered credibility on fiscal math and clarity on long-term priorities — but little instant gratification for markets hungry for triggers. With valuations already full and foreign investors on the sidelines, the next leg of the market’s journey will depend less on yesterday’s announcements and more on corporate earnings, global cues and the return of risk appetite.

Dalal Street may have survived the Budget shock — but the real test of conviction is only just beginning.