With much of the budget disappointment already priced in and global cues turning slightly supportive, the benchmarks recovered even as concerns over near-term growth and earnings lingered.
After sliding nearly 3% intraday on Sunday and closing nearly 2% down, the Nifty 50 climbed 1.06% on Monday to close at 25,088.40, and the Sensex rose 1.17% to 81,666.46.
The benchmarks comfortably outperformed the broader market, with Nifty Midcap 100 gaining 0.96%, and Nifty Smallcap 250 rising just 0.56%.
Among sectoral indices, Nifty Auto and Nifty Oil & Gas were the best performers, surging 2% each on Monday.
However, analysts said the recovery does little to change the bigger picture. The budget has reinforced policy continuity and long-term priorities, but offered limited support for near-term growth or earnings. With foreign investor flows still cautious and few immediate triggers in sight, market participants expect equities to remain range-bound, with buying limited to select stocks.
Have the markets really recovered?
“Today’s rebound looks more like a pause than a trend reversal, with the market still searching for direction,” said Kunal Parar, vice president – technical research and algo at Choice Equity Broking. He expects the Nifty 50 to correct another 200 points from the 25,000 mark before attempting a recovery, signalling a phase of range-bound and largely directionless trade.
According to Nilesh Jain, head – technical and derivatives research analyst (equity research), Centrum Broking, the markets staged a sharp rebound from oversold levels, with Nifty closing above the 25,000 mark, largely driven by short covering.
However, the immediate resistance is placed at the 200-day moving average of around 25,210, and a decisive move above this level would confirm a short-term trend reversal. On the downside, immediate support is seen at 24,800, followed by 24,680, Jain said.
Why the markets soared on Monday
Apart from a fading budget effect, what also helped was that oil prices slipped nearly 4% on Monday after reports said US president Donald Trump indicated Iran was “seriously talking” with Washington, signalling a possible easing of tensions with the OPEC member. Meanwhile, a stronger dollar also put pressure on prices.
Another factor that helped was a surge in share prices of some index heavyweights — Reliance Industries’ stock jumped 3%, while other major constituents—HDFC Bank, ICICI Bank, and Bharti Airtel—each gained around 1% on Monday.
What was expected from the budget
“The budget had a very granular focus on laying the building blocks for the future and maintaining policy continuity, but could have been punchier from the point of addressing near term concerns with regard to growth,” said Taher Badshah, president and chief investment officer of Invesco Mutual Fund, while adding that Monday’s market rally was somewhat unexpected.
Badshah also believes the budget should have been framed keeping the global and macro backdrop, which is rapidly inflecting, in mind.
In a post-budget analysis note, Elara Capital said markets reacted negatively on Sunday as the budget failed to anchor FY27 earnings, despite its focus on macro stability and capex.
The note added that while initiatives like data centres and AI support mid-term growth, they do little to boost India’s near-term appeal among emerging market (EM) peers. Further, higher STT (securities transaction tax) on futures and options (F&O) is unlikely to stem FPI outflows without an earnings recovery or relief from rupee weakness.
Goldman Sachs’ post-budget analysis echoed a similar view, noting that policymakers continue to prioritise macro and market resilience over near-term growth spurts. This is reflected in steady fiscal consolidation and the timing of the STT hike, which appears aimed at curbing derivatives-market speculation, “even at the cost of near-term equity upside”.
Looking forward
“We do think the last 15 months have been a reboot opportunity with significant policy resets in the backdrop of geopolitical developments and global macro uncertainties,” said Harish Krishnan, chief investment officer – equity at Aditya Birla Sun Life AMC.
It is thus imperative for investors to frame investment opportunities from a fresh lens—to assess that, over the coming 3-4 years, a newer set of themes and sectors is likely to be winners compared to investment theme-heavy winners in 2021-2024, he said.
“Seasonally, the first quarter has typically been negative for Indian equities—possibly, a similar trend in the near term can provide opportunities to build an equities portfolio with a medium-term perspective.”
What investors should now focus on, according to Badshah, is a cyclical earnings revival in FY27. Return expectations remain measured at around 10-12% for FY27, compared with 6-7% last year.
Besides, some market experts also noted that a trade deal with the US could swiftly turn sentiment more constructive. At the same time, fading momentum in the AI trade could channel some global flows toward India, with a stabilising rupee providing an added tailwind.
