Market Recovery Deep Dive: Bulls Charge Back on Monday, Monday, February 2, 2026

Executive Summary

Indian equity markets demonstrated remarkable resilience on Monday, Monday, February 2, 2026, staging a robust recovery from the post-Budget volatility seen in the preceding special session. The benchmark indices ended the day with significant gains, effectively recouping a large portion of recent losses. The BSE Sensex surged by 943.52 points, or 1.17%, to settle at 81,666.46, while the Nifty 50 advanced by 262.95 points, or 1.06%, to close at 25,088.40.

The rally was primarily fueled by the government's ambitious fiscal roadmap, which includes a record ₹12.2 lakh crore capital expenditure outlay for FY2026-27. This commitment to infrastructure-led growth revitalized sentiment in the Power, Auto, and Energy sectors. While the Bank Nifty underperformed the broader markets with a modest 0.35% gain to close at 58,619, the overall market tone remained bullish, supported by a significant decline in global crude oil prices and aggressive buying by Domestic Institutional Investors (DIIs).

Market Mechanics: Intraday Volatility and Recovery

The trading session on Monday was characterized by intense volatility and a decisive 'V-shaped' recovery. The Nifty 50 opened at 24,777.00, initially dipping to an intraday low of 24,679.00 as investors weighed the implications of the Securities Transaction Tax (STT) hike announced in the Budget. However, value buying emerged at lower levels, pushing the index to an intraday high of 25,108.00 before it settled above the psychological 25,000 mark.

The Sensex mirrored this trajectory, opening at 80,669.00 and swinging across a massive 1,345-point range. After touching a low of 80,387.25, a wave of buying in heavyweights like Reliance Industries and Tata Motors propelled the index to a high of 81,732.00. This recovery added approximately ₹4.42 lakh crore to total investor wealth in a single session.

Benchmark Performance Table

Top Movers Analysis

The Gainers

1. Power Grid Corporation (+7.42%): Emerging as the star performer, Power Grid benefited directly from the Budget's massive allocation toward power infrastructure and energy security. The stock closed at ₹270.00.
2. Tata Motors (+5.61%): The auto giant surged to ₹364.00 following stellar January sales data. The company reported a 23% YoY increase in vehicle sales to 339,513 units, driven by robust passenger vehicle demand.
3. Adani Ports & SEZ (+4.28%): Trading at ₹1,402.50, the stock rallied on expectations of increased trade volumes resulting from the government's infrastructure and logistics push.
4. Bharat Electronics (BEL) (+3.63%): Defense spending saw a 22% increase in capital outlay, providing a significant boost to BEL, which closed at ₹440.80.
5. Tata Consumer Products (+3.11%): As a defensive play, the stock rose to ₹1,121.10, reflecting investor interest in stable earnings amid global uncertainty.

The Losers

1. Shriram Finance (-3.17%): The NBFC fell to ₹966.00 as concerns over rising borrowing costs and increased government market borrowing weighed on the sector's margins.
2. Axis Bank (-2.33%): Leading the banking laggards, Axis Bank closed at ₹1,309.20. The sector faced pressure from concerns regarding the 4.3% fiscal deficit target and its impact on bond yields.
3. Max Healthcare (-1.82%): After a period of outperformance, the stock saw profit-booking, ending the day at ₹958.95.
4. Infosys (-1.66%): The IT heavyweight fell to ₹1,627.00, mirroring the broader weakness in the IT sector due to global tech spending concerns and AI-driven disruptions.
5. Cipla (-1.08%): The pharma major closed at ₹1,314.50 as the sector witnessed rotation out of defensive healthcare stocks into high-growth cyclical sectors.

Sectoral Deep Dive

• Auto (+2.13%): This was the top-performing sector, buoyed by strong January sales and the Budget’s focus on manufacturing. New model launches and rural demand recovery are seen as primary catalysts.
• Energy/Oil & Gas (+2.0%): Reliance Industries (+3.32%) led this sector higher. The plunge in global crude prices to $66.01 per barrel significantly improved the outlook for refining margins.
• Metal (+1.88%): Boosted by the ₹12.2 lakh crore capex announcement, which implies massive demand for steel and aluminum in infrastructure projects.
• Realty (+1.61%): The announcement to build 2 crore additional houses under PM Awas Yojana (PMAY) over the next five years acted as a major tailwind for real estate developers and building material stocks.
• IT (-0.5%): The sector bucked the positive trend. Weakness in global technology cues and the risk of higher-for-longer US interest rates pressured exports-oriented firms.
• Pharma (-1.0%): Pharmaceutical stocks saw the deepest sectoral cut as investors moved capital toward infrastructure and industrial themes following the Budget.

Institutional Activity and Market Breadth

The market saw a classic tug-of-war between Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs). FIIs remained net sellers, offloading equities worth ₹1,832.46 crore. This continued exodus is attributed to high Indian valuations and rising US Treasury yields (4.25-4.28%).

However, DIIs countered this pressure effectively, pumping in a net ₹2,446.33 crore. This institutional support, primarily from mutual funds, was instrumental in the Sensex's 944-point rally. Despite the headline gains, the market breadth was neutral, with 1,950 advances and 1,950 declines on the NSE. On the BSE, the advance-decline ratio was slightly negative at 0.93, suggesting that the rally was concentrated in heavyweight blue-chip stocks.

Global Factors Impact

• US Markets: Positive cues from Wall Street supported domestic sentiment. The Dow Jones rose 1.05% to 49,407.66 following strong ISM Manufacturing PMI data, which showed expanding new orders for the first time since August.
• Asian Bloodbath: Indian markets decoupled from their Asian peers. The South Korean Kospi plunged 5.26%, and the Hang Seng fell 2.23%. This regional selloff was triggered by concerns over US Federal Reserve chair nominees and a massive de-risking event in precious metals.
• Commodity Crash: Crude oil plunged over 4% to $66.01, a massive positive for India's trade deficit. Conversely, gold and silver saw historic crashes (Gold -6%, Silver -10%) due to a strengthening US Dollar and profit-booking, leading to a risk-off sentiment in non-equity assets.
• Currency: The Indian Rupee strengthened significantly, gaining 42 paise to close at 91.51 against the US Dollar, aided by falling oil prices and RBI intervention.

Key News Impact Analysis

• Capex Catalyst: The ₹12.2 lakh crore capital expenditure target for FY27 is the single largest driver of current market optimism. It signals a multi-year growth runway for engineering, cement, and steel companies.
• Housing Push: The PM Awas Yojana expansion (2 crore new houses) is expected to have a multiplier effect on the economy, benefiting sectors ranging from paints to electrical equipment.
• Tax Holidays: Data center stocks like Netweb Tech and Anant Raj surged following the Budget's announcement of a tax holiday until 2047 for foreign cloud providers setting up in India.
• Crude Oil Dynamics: Reports of potential US-Iran diplomatic talks sent crude prices tumbling, providing the necessary macro-economic cushion for Indian markets to rally despite FII selling.

Technical Outlook

Technically, the Nifty 50 has managed to reclaim the crucial 25,000 level, which now acts as immediate support. The intraday low of 24,679 serves as a vital floor for the current week. On the upside, the index faces resistance at 25,108 (today's high) and then at the 25,250-25,300 zone.

For the Bank Nifty, the 58,000 mark remains a psychological support level. The index needs to decisively cross 59,000 to confirm a trend reversal. The India VIX settled at 15.33, indicating a cooling of the extreme anxiety witnessed during the Budget session.

Strategic Implications for Investors

1. Focus on Capex Beneficiaries: Investors should look at high-quality names in the infrastructure, power transmission, and capital goods space that are direct beneficiaries of the ₹12.2 lakh crore outlay.
2. Selective Banking Exposure: While the Bank Nifty lagged, PSU banks and large private lenders with strong deposit franchises may offer value as the fiscal deficit roadmap provides clarity on future interest rate trajectories.
3. Defensive Rotation: With IT and Pharma showing weakness, maintaining a portion of the portfolio in FMCG (like Tata Consumer) may provide a hedge against global volatility.
4. Monitoring Global Risks: The sharp fall in Asian markets and precious metals suggests global risk appetite is fragile. Retail investors should avoid aggressive leverage and focus on staggered investments (SIPs) in large-cap heavyweights that are currently leading the recovery.

As we move past the Budget, corporate earnings for Q3 will become the next major trigger, determining if the current valuation premium is sustainable in the face of persistent FII outflows.