February 1, 2026 | Budget Shock Triggers Derivative Selloff, STT Hike Sparks Volatility Surge, and Nifty Slides Below 25,000

EXECUTIVE SUMMARY

Indian equity markets experienced intense volatility on Budget Day 2026, ending sharply lower as Finance Minister Nirmala Sitharaman’s proposal to hike Securities Transaction Tax (STT) on derivatives sparked widespread selling.

The Nifty 50 closed at 24,825.45 (-1.96%) and Bank Nifty at 58,417.20 (-2.00%). The volatility index surged 10.73% to 15.10, reflecting heightened uncertainty.

Both FII and DII recorded net outflows, with combined selling pressure of ₹1,271.07 crores dampening market sentiment.

MARKET OVERVIEW

INDEX PERFORMANCE

Nifty 50: 24,825.45 (-1.96%)
Bank Nifty: 58,417.20 (-2.00%)
Nifty Midcap 100: 58,169.00 (-2.25%)
Nifty Smallcap 100: 18,791.85 (-2.54%)
India VIX: 15.10 (+10.73%)

The sharp spike in India VIX to 15.10 (+10.73%) signals heightened fear and uncertainty in the market following the Budget announcements. Broader markets underperformed benchmarks, with midcaps declining 2.25% and smallcaps losing 2.54%, indicating across-the-board selling pressure.

MARKET BREADTH ANALYSIS

Advances: 610
Declines: 2,398
Unchanged: 71
Advance/Decline Ratio: 0.25
52-Week Highs: 30
52-Week Lows: 210

Market breadth turned extremely negative, with only 610 advances against 2,398 declines, yielding an A/D ratio of 0.25, the weakest seen in recent weeks.

The surge in 52-week lows (210) versus highs (30) underscores the broad-based nature of the selloff triggered by Budget proposals.

BUDGET 2026 IMPACT

Finance Minister Nirmala Sitharaman presented Union Budget 2026 with several measures directly impacting equity markets:

• STT hike on derivatives – increased Securities Transaction Tax on F&O trading, triggering immediate selloff in derivative-heavy stocks
• Market reaction: Sensex plunged 1,547 points to 80,722.94 (-1.88%); Nifty fell nearly 500 points from intraday highs
• Volatility surge: India VIX jumped nearly 14% intraday before settling at +10.73%
• Sectoral impact: Defense and metal sectors faced maximum pressure; IT showed relative resilience

The STT hike proposal particularly impacted retail traders and proprietary desks, leading to sharp unwinding of leveraged positions across F&O segments.

OPTIONS MARKET ANALYSIS

NIFTY 50 OPTIONS (03 FEBRUARY 2026 EXPIRY)

Total Call Open Interest: 4,408,386 contracts
Total Put Open Interest: 1,898,359 contracts
Put-Call Ratio (PCR): 0.43
Signal: Bullish – High Call Build-up

KEY STRIKE LEVELS – NIFTY 50

Maximum Call OI: 26,000 (337,160 contracts) – Strong resistance zone
Maximum Put OI: 23,500 (196,127 contracts) – Critical support level

TOP 5 RESISTANCE STRIKES (CALL OPEN INTEREST)

26,000: 337,160 contracts
26,500: 295,225 contracts
25,500: 252,999 contracts
27,000: 219,812 contracts
25,400: 178,450 contracts

TOP 5 SUPPORT STRIKES (PUT OPEN INTEREST)

23,500: 196,127 contracts
23,300: 180,776 contracts
24,000: 175,904 contracts
24,500: 103,197 contracts
25,000: 76,902 contracts

The extremely low PCR of 0.43 indicates significantly higher call open interest compared to puts, suggesting traders had positioned for upside before the Budget. The concentration of resistance at 26,000 and support at 23,500 defines a 2,500-point trading range for the near term.

BANK NIFTY OPTIONS (24 FEBRUARY 2026 EXPIRY)

Total Call Open Interest: 361,911 contracts
Total Put Open Interest: 308,889 contracts
Put-Call Ratio (PCR): 0.85
Signal: Neutral to Cautious

KEY STRIKE LEVELS – BANK NIFTY

Maximum Call OI: 60,000 (60,340 contracts) – Resistance
Maximum Put OI: 60,000 (49,059 contracts) – Support

Both calls and puts concentrated at 60,000 strike indicate this as a critical pivot level for Bank Nifty.

TOP 5 RESISTANCE STRIKES – BANK NIFTY

60,000: 60,340
62,000: 21,293
61,000: 20,656
59,000: 15,985
63,000: 15,886

TOP 5 SUPPORT STRIKES – BANK NIFTY

60,000: 49,059
58,000: 21,991
58,500: 21,006
59,000: 19,800
57,000: 17,874

TOP MOVERS

TOP GAINERS (NIFTY 50)

Max Healthcare: ₹1,191.35 (+2.08%)
Wipro: ₹307.60 (+2.07%)
TCS: ₹4,398.50 (+2.02%)

IT stocks TCS and Wipro showed resilience despite broader market weakness, benefiting from defensive flows. Max Healthcare led gains, reflecting strength in healthcare amid volatility.

TOP LOSERS (NIFTY 50)

HDFC Bank: ₹1,861.30 (-4.39%)
Shriram Finance: ₹3,425.90 (-4.37%)
ITC: ₹468.15 (-3.94%)

HDFC Bank led decliners as financials bore the brunt of Budget-related concerns. FMCG major ITC declined sharply reflecting risk-off sentiment.

SECTORAL STOCK MOVERS

SECTOR-WISE PERFORMANCE

Banking: AXISHCETF +1.68%, ICICIPRULI +1.04%, HDFCSILVER -14.97%

IT: Wipro +2.07%, TCS +2.02%, DELTIC -4.88%

Auto: TVSELECT +3.04%, ASHOKA +0.40%, M&MFIN -4.53%

Pharma: Sun Pharma +0.93%, Biocon +0.38%, Dr Reddy’s -3.23%

FMCG: KILITCH +3.25%, MITCON +2.49%, ITC -3.94%

SECTORAL HIGHLIGHTS

Banking: Mixed performance with ETFs outperforming; HDFCSILVER crashed 14.97% on commodity-linked concerns.

IT: Defensive strength with Wipro (+2.07%) and TCS (+2.02%) leading; sector benefited from safe-haven flows.

Auto: TVSELECT topped with +3.04% gains; M&MFIN declined 4.53% on NBFC concerns.

Pharma: Sun Pharma held positive at +0.93%; Dr Reddy’s fell 3.23% on profit booking.

FMCG: Small-caps like KILITCH (+3.25%) outperformed, while heavyweight ITC dropped 3.94%.

FII–DII ACTIVITY

FII Cash Market Net Flow: -₹588.34 crores
(Gross Purchase: ₹598.29 cr | Gross Sales: ₹1,186.63 cr)

DII Cash Market Net Flow: -₹682.73 crores
(Gross Purchase: ₹14,390.79 cr | Gross Sales: ₹15,073.52 cr)

Combined Net Flow: -₹1,271.07 crores

Both Foreign Institutional Investors (FII) and Domestic Institutional Investors (DII) turned net sellers on Budget Day, reflecting broad-based risk aversion following Budget proposals.

DII outflows are particularly notable as domestic institutions typically provide support during periods of FII selling. Month-to-date figures for February 2026 mirror this negative stance.

CURRENCY MARKET

INR / USD: ₹91.8983 (FBIL – 30 January 2026)
INR / GBP: ₹126.3834
INR / EUR: ₹109.5661
INR / 100 JPY: ₹59.72

Note: Forex markets were closed on 01 February 2026. The USD-INR rate reflects relative stability despite equity market volatility. Next trading update expected on 03 February 2026.

QUARTERLY RESULTS HIGHLIGHTS

Several key companies announced Q3 FY2025–26 results on 01 February 2026.

STRONG PERFORMERS

NTPC: Net profit ₹5,597 cr (+8.3% YoY); Revenue ₹45,846 cr (+1.7% YoY)

Bank of Baroda: Net profit ₹5,054 cr (+4.5% YoY); NII ₹11,800 cr (+0.1% YoY)

IDFC First Bank: Net profit ₹502.5 cr (+48% YoY); NII ₹5,492.4 cr (+12% YoY)

Ajanta Pharma: Net profit ₹274 cr (+17.6% YoY); Revenue ₹1,375 cr (+20% YoY)

Delhivery: Net profit ₹39 cr (+56% YoY); Revenue ₹2,805 cr (+18% YoY)

WEAK PERFORMERS

Clean Science & Tech: Net profit ₹45.8 cr (-30.2% YoY); Revenue ₹220 cr (-8.7% YoY)

NIIT: Net profit ₹3.9 cr (-70.7% YoY); Revenue ₹101 cr (+3.1% YoY)

Meesho: Net loss ₹490.67 cr versus loss of ₹37.43 cr YoY; Revenue ₹3,517.60 cr (+31.3% YoY)

NTPC and Bank of Baroda demonstrated steady growth, while IDFC First Bank’s 48% profit growth highlighted strong NBFC performance. Meesho’s widening losses despite revenue growth reflect continued focus on market share expansion over profitability.

MARKET OUTLOOK

TECHNICAL VIEW

Immediate Support: 24,500–24,600 (tested intraday); break could lead to 24,000

Immediate Resistance: 25,000 (psychological level); 25,400–25,500 (call build-up zone)

Volatility: Elevated with India VIX at 15.10

Key Pivot: Bank Nifty 60,000 (heavy options concentration)

FUNDAMENTAL CONSIDERATIONS

The Budget 2026 STT hike on derivatives represents a structural headwind for F&O volumes, potentially impacting brokerage firms and exchange revenues.

Markets will now focus on:

1. Implementation timeline and granularity of STT changes
2. Q3 earnings trajectory, which remains mixed
3. Global cues and FII positioning
4. RBI monetary policy stance (next meeting in April 2026)

TERM OF THE DAY – PUT-CALL RATIO (PCR)

Put-Call Ratio (PCR) measures the ratio of put option open interest to call option open interest and serves as a sentiment indicator.

Formula:
PCR = Total Put Open Interest ÷ Total Call Open Interest

INTERPRETATION

PCR > 1.0: Bearish sentiment or hedging
PCR = 1.0: Neutral positioning
PCR < 1.0: Bullish sentiment
PCR < 0.5: Extreme bullish positioning (contrarian bearish signal)
PCR > 1.5: Extreme bearish positioning (contrarian bullish signal)

TODAY’S CONTEXT

Nifty 50 PCR at 0.43 reflected aggressive bullish positioning before Budget Day, which was sharply unwound after the STT hike announcement.

Bank Nifty PCR at 0.85 suggested more balanced positioning in banking stocks.

PRACTICAL APPLICATION

Traders use PCR with price action to identify sentiment extremes. Very low PCR values often precede corrections, while very high PCR values may signal rebound opportunities.

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Prepared by: Oorjita FinAI Research Team
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