Rs 9.6 Lakh Crore Wiped Out In Intense Stock Market Rout; Sensex Nosedives 1,546 Pts, Nifty Sinks 495 Pts; Why

Indian stock market witnessed an intense roller coaster ride on February 1, with Sensex and Nifty 50 breaking below pivotal levels like 81,000 and 25,000, respectively. Both benchmarks plummeted by nearly 2% in a single day, marking a bearish start to the new month. Following this, nearly Rs 10 lakh crore of wealth was erased on BSE. Although the majority of indices ended in deep red, sectoral indexes like capital markets, defence and PSU banks took the worst hit. Will the trend continue on Monday, a day after Budget 2026?

"Union Budget 2026 marks a critical phase for the Indian capital markets," said Swapnil Aggarwal, Director, VSRK Capital.

Although the increase in Securities Transaction Tax (STT) on Futures from 0.02 % to 0.05 % and on Options premiums has caused short-term setbacks in derivatives trading volumes and impacted brokerage and exchange stocks heavily, Aggarwal added that Budget also symbolizes the Government's effort to standardize market participation costs.

"This has resulted in sell-offs in major broking stocks and increased market volatility," said the expert.

It needs to be noted that STT is only in equity not commodity.

Sensex, Nifty 50 On February 1:

The hike in securities transaction tax emerged as the major reason for investors to turn bearish steeply on Sensex and Nifty.

After closing bell on February 1, Sensex closed at 80,722.94, down by 1546.84 points or 1.88%. While Nifty 50 dropped by 495.20 points or 1.96% to close at 24,825.45.

Following this, BSE-listed companies market cap stood at Rs 4,50,61,658.60 crore, which is a steep decline of Rs 9,55,242.35 crore from January 31st market cap of Rs 4,60,02,240.35 crore.

India's volatility index skyrocketed by nearly 11% after closing bell.

Gainers & Losers:

Gainers were stocks like TCS, Infosys, and Sun Pharma after Finance Minister Nirmala Sitharaman announced major developments to push AI adoption and pharmaceutical sector. FM declared Rs 10,000 crore outlay for Biopharma Shakti initiative.

However, the losers list included heavyweights like SBI, Adani Ports, Bharat Electronics, ITC, Tata Steel, Reliance Industries, Ultratech Cement, Larsen & Toubro, Bajaj Finance, and Asian Paint shares which dropped by 3% to 6%.

BSE BANKEX plummeted by 1454.53 points or 2.2%, while Bank Nifty tumbled by 2% to end at 58,417.20. Indices like Nifty Midcap and Nifty Smallcap crashed by more than 2% to nearly 3%. Except for IT stocks, all other sectoral indices closed in deep red.

Nifty PSU Bank crashed by nearly 5.6%, while Nifty India Defence dropped by 5.09%, and Nifty Metal index plunged by 4.05%. Indices like Nifty Auto, Nifty FMCG, Nifty Realty and Nifty Oil & Gas tumbled by 2% to 3%. Nifty IT index managed to end in green with upside of nearly 0.6% due to buying trend in heavyweights like TCS and Infosys.

"Today, the benchmark indices witnessed a volatile trading session. After a roller coaster activity, the Nifty ended 495 points lower, while the Sensex was down by 1546 points. Among sectors, almost all the major sectoral indices were traded in to the red but Capital Market, Defence, and PSU Banks indices lost the most, shed over 5 percent," said Shrikant Chouhan, Head Equity Research, Kotak Securities.

Technically, Chouhan added, after a sharp intraday dip in the second half of the day, the market trimmed some losses. From the day's lows, the market bounced back sharply. On daily charts, it has formed a long bearish candle, and it is currently trading below the 200-day SMA (Simple Moving Average), which is largely negative."

Stock Market Outlook On Monday, February 2, 2026:

In Chouhan's view, 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. On the higher side, 25,000/81300 would act as a crucial resistance zone. As long as the market is trading below this level, weak sentiment is likely to prevail.

On the downside, the expert said, the correction wave is likely to continue till 24650-24600/80100-79900. Further down side may also continue which could drag the index till 24500-24300/79600-79000. On the flip side, above 25,000/81300, the market could move up to 25,200/81900 or 200day SMA .

Which sectors to see movement? As per Aggarwal, going forward, we forecast rotational investments in infrastructure, financials, specific manufacturer and export-oriented sectors, and long-term investors may also gain from enhanced market liquidity and foreign participation due to these reformative initiatives.

Overall, Vinayak Magotra, Product Head & Founding Team, Centricity WealthTech said, despite this near-term concern, the overall direction of the budget remains constructive. Over the longer term, these measures are expected to contribute positively to market structure and fiscal stability, which should ultimately be beneficial for Indian capital markets."

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