Sensex Surges 944 Points: Indian Markets Stage Dramatic Recovery Post-Budget Amid Global Precious Metals Meltdown

Monday, February 2, 2026, proved to be a historic session for Indian capital markets. In a display of extreme resilience, domestic equities staged a remarkable turnaround from the previous day's Budget-induced sell-off. Even as global markets reeled from an unprecedented meltdown in precious metals—triggered by major shifts in U.S. Federal Reserve leadership—the BSE Sensex surged 944 points to close at 81,666, while the Nifty 50 gained 263 points to settle back above the psychologically crucial 25,000 mark at 25,088.

For retail investors, the session was a masterclass in market dynamics, reflecting a complex interplay between domestic policy shifts, such as the increase in Securities Transaction Tax (STT) on derivatives, and global macro events. While brokerage stocks faced significant pressure, sectors like Power and Auto led the charge, supported by robust earnings and record-breaking January sales figures. This report provides a detailed breakdown of the session's events, from the commodity crash to the $2.5 billion NSE IPO announcement.

Market Performance and Recovery Dynamics

Intraday Volatility and Recovery Pattern

The Indian equity markets demonstrated significant volatility on February 2, overcoming early-session jitters to stage one of the most dramatic intraday reversals in recent history. The Sensex exhibited a swing range of 1,345 points, oscillating between an intraday low of 80,387 and a high of 81,732 before settling at 81,666 (+1.17%). The Nifty 50 mirrored this pattern, moving between 24,679 and 25,108 before closing at 25,088 (+1.06%).

This recovery followed the worst Budget-day performance since February 2020. During the special Sunday session on February 1, the Sensex had plunged 1,546.84 points (1.88%) and the Nifty fell 495.20 points (1.96%) in response to the government's hike in STT on futures and options trading. The India VIX, or the 'fear gauge,' declined 8% on Monday, suggesting that investor sentiment was stabilizing as they digested the long-term implications of the Budget.

Sectoral Performance: Winners and Losers

The sectoral landscape on February 2 revealed a sharp divide. The Nifty Auto index led the gainers with a 2.14% rise, fueled by record January sales data. The Nifty Metal index rose 1.8%, and the Nifty Realty index gained 1.6%, supported by Budget proposals aimed at Tier-II and Tier-III infrastructure.

Conversely, the Nifty IT index was the sole laggard, falling 0.47% as investors opted for profit-taking despite the new 21-year tax holiday for cloud services. The FMCG index hit a 52-week low, with staples companies like Hindustan Unilever, ITC, and Patanjali declining up to 3% due to rural demand concerns.

Institutional Investor Flows

Data from the special session on February 1 shows that both Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) were cautious.

• FII Net Flow: -₹588.34 crore (Net Sellers)
• DII Net Flow: -₹682.73 crore (Net Sellers)

The dual selling highlighted initial uncertainty surrounding the STT hike. However, the strong recovery on Monday suggests that retail buyers and certain institutional players viewed the dip as a strategic entry point into infrastructure and power stocks.

Global Impact: The Precious Metals Meltdown

Kevin Warsh Nomination Triggers Historic Crash

Global markets were rocked by an unprecedented collapse in precious metals following President Donald Trump's nomination of Kevin Warsh as the next Chairman of the Federal Reserve. Markets perceive Warsh as a hawk who might aggressively pursue interest rate cuts and shrink the Fed’s balance sheet, strengthening the U.S. Dollar at the expense of gold and silver.

Gold tumbled as much as 7.5% intraday before settling at $4,745.10 per ounce (a 11.4% decline). Silver experienced a catastrophic 31.4% plunge after hitting lows of $72.63. This rout triggered contagion across Asia, with South Korea's Kospi slumping 5.6% and the Jakarta market losing 5.7%.

CME Margin Hike and Indian Commodities

The sell-off intensified after the CME Group raised margin requirements for gold futures from 6% to 8%. In India, the impact was felt across MCX contracts:

While silver has fallen nearly 21% in a week, gold displayed relative resilience on Monday after hitting a lower circuit of 9% earlier in the session. This dislocation led to a spike in physical silver premiums, which reached $3.50–$4.50 above spot prices as retail shortages worsened.

Major Policy Developments: Budget 2026

The STT Hike on Derivatives (F&O)

Finance Minister Nirmala Sitharaman’s decision to increase the Securities Transaction Tax (STT) on futures from 0.02% to 0.05% remains a central point of contention. This 150% increase significantly raises the cost of doing business for high-frequency traders.

Impact on Trading Costs:

• Options: For a ₹10,000 contract sale, tax rises from ₹6.25 to ₹10.
• Futures: For every ₹1 lakh sold, the tax rises from ₹12.50 to ₹20.

Stock Reaction (Brokerages & Exchanges):

• BSE Ltd: -8.12% to ₹2,570 (60% of revenue comes from equity derivatives).
• Angel One: -8.61% to ₹2,320 (F&O contributes 44% of gross revenue).
• Groww (Billionbrains): -5.11% to ₹168.
• MCX: -11.60% to ₹2,232.15.

21-Year Tax Holiday for Cloud Services

In a strategic move to turn India into a global data hub, the Budget introduced a tax holiday until 2047 for foreign companies providing cloud services via Indian data centers. IT Minister Ashwini Vaishnaw projected that investments in the sector could surge from $70 billion to $200 billion. India currently ranks 8th globally with 271 data centers, and this policy aims to compete with regional hubs like Singapore.

PFC and REC Ltd Restructuring

The government announced the restructuring of Power Finance Corporation (PFC) and REC Ltd to enhance capital efficiency. Analysts from Morgan Stanley forecast a 12% loan CAGR for these entities between FY25 and FY28, with a Return on Equity (ROE) of 17-19%. Power Grid Corporation surged 7.6% as the top Sensex gainer following this news.

Corporate Developments and Earnings Season

Q3 FY26 Earnings Highlights

With over 680 companies reporting this week, the early results suggest a healthy corporate environment:

The $2.5 Billion NSE IPO

The National Stock Exchange (NSE) is progressing toward what will be India’s largest financial sector IPO. The $2.5 billion (₹22,900 crore) offering is expected to be a purely secondary sale of 4–4.5% equity. Key sellers include LIC (10.72% stake), Temasek (4.5%), and the SBI Group (7.7%). The board meets on February 6 to form an oversight committee, with a listing targeted for the second half of 2026.

Automobile Sector: Record January Sales

The industry achieved a historic milestone in January 2026 with 27.2 lakh units sold domestically.

• Tata Motors: PV sales surged 46.1% to 70,222 units.
• Mahindra & Mahindra: SUV sales up 25% to 63,510 units (Bookings total ₹20,500 crore).
• Hyundai India: Highest-ever domestic monthly sales of 59,107 units.
• Maruti Suzuki: Domestic sales flat at 1.85 lakh units, but bookings rose 25%.

ED Action: Reliance Anil Ambani Group

The Enforcement Directorate (ED) provisionally attached assets worth ₹1,885 crore of the Reliance Anil Ambani Group, bringing total attachments in the probe to ₹12,000 crore. The probe alleges a ₹13,600 crore diversion for loan evergreening and funds siphoning through group entities including RCom and Reliance Power.

Monetary Policy: RBI Decision Awaited

The RBI Monetary Policy Committee (MPC) meets from February 4-6, 2026. Data suggests a likely pause in the rate-cutting cycle.

• Expected Repo Rate: 5.25% (No change).
• Inflation Forecast: Revised down to 2.0% from 2.6%.
• Liquidity: The RBI has injected $23 billion via bond purchases and FX swaps to ensure policy transmission after a cumulative 125 bps cut since 2025.

Key Takeaways for Investors

• Market Resilience: The Nifty's ability to reclaim 25,000 after a major Budget shock indicates strong underlying domestic support.
• Commodity Caution: The 31.4% crash in Silver and 11% drop in Gold signal a massive shift in global liquidity. Investors should monitor the U.S. Dollar index (DXY).
• Derivative Costs: The STT hike is a structural negative for brokerage firms like BSE and Angel One, likely leading to a 5-10% volume decline.
• Power & Infra Play: Restructuring of PFC/REC and Power Grid's capex guidance make the energy sector a key monitorable.
• Auto Momentum: Record sales figures from Tata Motors and M&M validate strong consumer demand despite high interest rates.

What This Means for Investors

Historical trends indicate that Budget-induced volatility often provides long-term entry points in quality stocks. While the STT hike creates a higher hurdle for derivatives traders, the broader economy remains on a solid footing with 7.4% GDP growth projected for FY26.

Investors may consider monitoring the NSE IPO progress, as it will likely become a benchmark for the financial services sector. Furthermore, the potential shift to Venezuelan oil (as suggested by President Trump) could lower India's import bill, providing a tailwind for the Rupee and oil refining companies. However, the governance issues highlighted by the ED action against the Anil Ambani group serve as a reminder to prioritize stocks with strong corporate governance and clean balance sheets.