The country’s standing among the world’s worst performing stock markets this year fuelled expectations of steps to revive earnings and lure back global funds.
Foreign investors have dumped more than $3 billion in local shares since the start of 2026, helping the NSE Nifty 50 Index slump 3.1 per cent in January.
The equity benchmark extended that selloff in a special Sunday session, marking its worst budget-day performance in six years.
The nation’s sovereign bonds are expected to slide when trading resumes on Monday after the government said it will borrow 17.2 trillion rupees ($187 billion) in the year starting April 1, exceeding economists’ estimates.
Policymakers plan to hike the securities transaction tax on equity futures to 0.05 per cent from 0.02 per cent, while taxes on options premiums and the exercise of options will increase to 0.15 per cent, according to the budget presented in Parliament. A government official said the changes will bring in about 150 billion rupees annually.
“The budget was disappointing,” said London-based Arvind Chari, chief investment strategist at Q India UK. “There weren’t tax measures to improve global capital flows to India at a time when the investment world is looking for large alternate investment destinations,” he said.
Here’s what strategists and fund managers had to say: Sanford C Bernstein (Venugopal Garre and Nikhil Arela)
-
It has not been a great start to the year and this raised expectations ahead of the budget. The lack of an immediate positive in the budget and bits and pieces of everything in some way drove a sharp market correction
-
What we received was a largely academic budget, marked by marginal deficit reductions, continued increases in revenue expenditure, and a modest uptick in capex. While there were several sector-specific announcements aimed at stimulating investment, many were designed as long-term enablers rather than drivers of immediate growth
-
The increase in STT for derivatives has dampened market sentiment, and the widely-anticipated long-term capital gains tax cuts did not materialize, further disappointing investors
Jefferies Financial Group (Mahesh Nandurkar)
-
No immediate trigger for the equity markets but a solid base is being formed
-
The slower fiscal consolidation / high gross borrowing target without any expected policy support for bond markets is likely to drive bond yields higher by 5 to 8 basis points, and will be negative for rate-sensitive stocks
-
The budget also did not have any capital gains-related anticipated relaxations for foreign investors, which is negative considering foreign outflows and a weak rupee. Alongside this, an increase in securities transaction tax on derivatives will dampen some equity market sentiments
-
Budget is positive for Larsen & Toubro Ltd., defense stocks, One 97 Communications Ltd., Lodha Developers Ltd., while negative for capital market-related shares and non-bank lenders
Barclays (Aastha Gudwani and Amruta Ghare)
-
The budget fell short of reforms for financial markets. Both gross and net borrowings were higher than expected. Adding to this, the much-awaited tax rationalization for foreign portfolio investors and/or domestic debt mutual funds was not addressed
-
Beyond fiscal math, this budget focused on cushioning the blow from steep US tariffs by announcing relief measures for MSMEs, labor intensive sectors, easing import duty on key raw materials and capital goods
Axis Mutual Fund (Ashish Gupta, chief investment officer)
-
Overall, it is a mixed bag for capital markets, with a stable tax regime being maintained, although increases in certain STTs and the borrowing program may cause some disappointment
-
This year’s budget is fairly conservative in its approach. The government has forecast a reduction in the fiscal deficit by assuming nominal GDP growth of around 10% and tax growth of about 8%, indicating that its assumptions remain measured
-
Unlike last year, which saw a large stimulus for consumption and manufacturing through consumption tax cuts, this budget is more focused on providing stimulus to the services sector
Kotak Mahindra Life Insurance (Churchil Bhatt, executive vice president for investments)
-
Net market borrowing is expected to finance slightly less than 70% of the fiscal deficit. However, bond markets were anticipating a lower gross borrowing by way of dated securities. As a result, the 10-year bond yield may open 4 to 5 basis points higher
More stories like this are available on bloomberg.com
Published on February 2, 2026
