Indian equity markets witnessed a dramatic downturn on Tuesday, with the BSE Sensex plummeting over 1,900 points and the Nifty slipping below the 24,600 mark, erasing investor wealth to the tune of approximately Rs 10 lakh crore. The sharp selloff came in the wake of the vote-on-account Budget for FY25, which failed to reassure market participants on key fronts such as fiscal discipline, capital gains taxation, and public spending. The Economic Times reported on the development in an article titled “Rs 10 lakh crore wiped out: Sensex down 1900 points, Nifty below 24600 — Why did the stock market crash after Budget? Key factors.”
Broader markets were not spared in the rout, with the Bank Nifty, Midcap, and Smallcap indices all registering steep declines. Banking, auto, energy, real estate, and financial services stocks bore the brunt of the selloff, while even typically defensive sectors such as information technology were not immune to the widespread risk aversion. A confluence of macroeconomic and political factors contributed to the market’s pronounced volatility and negative sentiment.
Among the key factors cited by analysts was disappointment over the lack of clarity and direction in budgetary allocations and spending priorities. Investors were looking for stronger guidance on fiscal prudence and growth-oriented policy measures in the interim Budget. The absence of substantial signals on containing the fiscal deficit or increasing infrastructure spending created uncertainty, especially at a time when global markets are already grappling with elevated interest rates and geopolitical instability.
Additionally, concerns were heightened by speculation around a potential reintroduction of the long-term capital gains tax on equity investments, a move that could dampen retail and institutional participation in Indian equities. While the Budget did not confirm such a tax change, the lingering ambiguity was enough to rattle sentiment on Dalal Street.
Further compounding market unease is the political backdrop ahead of the upcoming general elections. As the incumbent government focuses on maintaining fiscal order without committing to populist spending in its interim presentation, investors may be positioning cautiously amid the evolving electoral landscape. Historically, the lead-up to national elections has brought heightened volatility as investors weigh policy continuity against potential shifts in power.
Global factors added to the headwinds. A recent uptick in U.S. Treasury yields and signs that interest rate cuts may be delayed by major central banks have weighed on foreign portfolio investments in emerging markets, including India. With foreign institutional investors turning net sellers, the sustained capital outflows have further pressured Indian equities.
Despite the day’s steep losses, some market participants see this correction as a much-needed breather following the sharp rally seen in recent months. Markets had reached record highs in January, fueled by strong domestic inflows and optimism around India’s growth story. Tuesday’s fall, while severe, could offer long-term investors an opportunity to re-enter at more reasonable valuations, provided macroeconomic fundamentals remain intact.
Investors and analysts are now awaiting further cues from the Reserve Bank of India’s policy stance, upcoming earnings results, and global economic developments. In the near term, however, markets may remain volatile as they digest the implications of the interim Budget and the uncertainty ahead of the national polls.
While the losses are significant, seasoned observers caution against panic, urging investors to keep a long-term perspective amid near-term turbulence in the market.
