Red-hot markets face Budget test

Adverse tweaks to capital market-related taxes could trigger knee-jerk reaction from investors

- SUNDAR SETHURAMAN

From their record highs on Friday, the benchmark indices have dropped by over a per cent, while the India Vix, a gauge of market volatility, has surged nearly 10 per cent in the past week.

Investor sentiment, which remains largely buoyant, will now be tested by the Union Budget announcements. Any adverse changes to capital marketrelated taxation could trigger a knee-jerk reaction from investors, as the stock markets have not yet priced in any negatives, experts say.

The weakness over the past two days was stock-specific and largely a reaction to the April-June quarter (Q1) of 2024-25 (FY25) earnings.

On Monday, the markets were dragged lower by a correction in index heavyweight Reliance Industries (RIL), whose first-quarter profit missed Street estimates. However, gains in top-weight HDFC Bank and the extension of the rally in Infosys helped cushion the blow.

The S&P BSE Sensex ended the session at 80,502, down 103 points, or 0.1 per cent. The National Stock Exchange Nifty 50 ended at 24,509, down 22 points, or 0.1 per cent from its previous close.