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Budget 2026: Indian stock market benchmarks - Sensex, Nifty 50 are likely to witness a cautious to mildly negative opening on February 2 as investors continue to process key Budget announcements along with weak global cues. The absence of market-friendly tax relief and the sharp increase in Securities Transaction Tax (STT) on derivatives are expected to weigh on early sentiment, particularly in high-beta and F&O-heavy counters.

According to Aakash Shah, Technical Research Analyst at Choice Equity Broking, “Indian equities are likely to see a cautious to mildly negative opening on Feb 2 as investors digest key Budget announcements alongside weak global cues.”

He added that pressure from a stronger dollar, weakness in cryptocurrencies, and mixed US futures may cap any sharp upside in Indian benchmarks, while recent sessions have also seen sustained FII selling amid global risk-off positioning.

From a technical perspective, markets are in a consolidation-to-corrective phase, and key levels will determine the immediate direction. Shah highlighted that for the Nifty 50, the immediate support lies between 24,500 and 24,400, while resistance is placed in the 25,000–25,150 zone. A decisive move above 25,150 could open the path toward 25,550.

Mayank Jain, Market Analyst, Share.Market also belives investors should prepare for volatility when the market opens on Monday morning. The market is still trying to balance the bad news of the trading tax (STT) hike against the good news of the government’s growth plans.

Important levels Monday - Immediate Support: 24,500 – 24,400. The 24,500 strike currently holds the maximum Put Open Interest (OI), which significantly increases its importance as a key floor for the index.

Immediate Resistance: 25,000 – 25,100. This zone now acts as a stiff "supply wall" on any recovery attempts. Additionally, these levels carry significant Call Open Interest, suggesting that sellers are likely to defend this range aggressively.

Adding to this, Shrikant Chouhan, Head Equity Research at Kotak Securities, said, “We are of the view that the short-term market texture is volatile, and volatility is likely to continue in the near future. Hence, level-based trading would be the ideal strategy for day traders.” He noted that as long as the market trades below 25,000 on Nifty and 81,300 on Sensex, weak sentiment may persist. On the downside, further correction could test 24,650–24,600, and if selling intensifies, even 24,300 cannot be ruled out.

On Sunday, February 1, markets reacted sharply after Finance Minister Nirmala Sitharaman announced a steep hike in STT on derivatives. STT on futures was raised to 0.05% from 0.02%, and on options to 0.15% from 0.01% earlier.

The BSE Sensex fell 1,547 points, or 1.88%, to close at 80,722.94, while the Nifty 50 declined 495 points, or 1.96%, to settle at 24,825.45. Nearly ₹10 lakh crore in investor wealth was wiped out as total market capitalisation fell to ₹450 lakh crore from ₹460 lakh crore.

Broader markets were also hit hard, with the BSE MidCap index down 1.91% and the SmallCap index falling 1.61%. Sectorally, Nifty PSU Bank plunged 5.57%, Metal index dropped 4.05%, and Oil & Gas, Financial Services, Auto, FMCG, and Realty indices fell over 2%. Nifty Bank ended 2% lower at 58,417.20.

Ajit Mishra of Religare Broking explained the sentiment reaction. He said, “The negative market reaction to the STT hike is largely sentiment-driven and linked to higher transaction costs, especially in the derivatives segment, which contributes significantly to daily volumes.” He added that brokerage and exchange stocks faced disproportionate pressure due to concerns around liquidity and trading profitability.

Despite the volatility, analysts believe the broader economic and earnings outlook remains intact. The Budget’s fiscal discipline, record ₹12.2 lakh crore capex plan, and infrastructure-led growth strategy continue to support the long-term equity narrative.

Divam Sharma of Green Portfolio PMS noted that consistent capex-led growth may support higher long-term valuations, especially for cyclical and capital goods stocks, helping restore investor confidence once short-term noise subsides.

“While short-term market reactions may be influenced by macro factors and liquidity conditions, consistent capex-led growth can support higher long-term equity valuations, especially for cyclical and capital goods stocks,” Sharma said.

As markets open on Monday, traders are likely to remain cautious near resistance levels, while long-term investors may look at declines as opportunities in fundamentally strong sectors. The initial reaction may remain muted or weak, but technical supports and strong macro fundamentals could limit deeper downside, setting the stage for stabilisation after the Budget-induced shock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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