- Sensex up 1.17% after a budget‑induced sell‑off – the biggest rebound since November.
- Reliance, L&T and Latent View drive the upside, hinting at sector‑wide tailwinds.
- Rupee’s strongest one‑day gain in a month cushions external volatility.
- Technical indicators flip from oversold, fueling short‑covering momentum.
- Bull and bear scenarios outlined for the next 4‑8 weeks.
You missed the budget panic, but you can catch the rebound.
Why the Budget Hangover Is Fading and What It Means for the Sector
Sunday’s budget sparked a 2% plunge – the steepest budget‑day drop in six years – mainly because of a proposed hike in securities transaction tax (STT) on derivatives and a higher‑than‑expected borrowing plan for FY27. Investors reacted with knee‑jerk selling, but the core policy narrative remained unchanged: a continued push on infrastructure, manufacturing and fiscal discipline.
That continuity is a quiet catalyst for capital‑intensive sectors such as construction, cement and renewable energy. When the government signals steady capex, order‑books for firms like UltraTech, Hindustan Construction and the emerging green‑energy players tend to expand, lifting sector earnings outlooks. Historically, budget‑linked capex announcements have preceded a 3‑5% sector‑wide rally within the next quarter, as seen after the 2022 budget.
How Heavyweights Like Reliance and L&T Are Anchoring the Recovery
Reliance Industries surged 3.2%, erasing a 3.5% loss from budget day and becoming the top contributor to both Sensex and Nifty gains. The conglomerate’s diversified exposure – from petrochemicals to telecom and digital services – positions it to profit from both higher domestic consumption and the government’s push for digital infrastructure.
Larsen & Toubro climbed 2.8%, reflecting trader bets that the renewed emphasis on capital expenditure will translate into a pipeline of large‑scale contracts for engineering, procurement and construction (EPC) projects. Meanwhile, mid‑cap data‑analytics firm Latent View jumped 9% after beating December‑quarter profit estimates, underscoring a broader risk‑on sentiment toward high‑margin, tech‑enabled businesses.
Peers such as Tata Power and Adani Green are also watching the budget closely. While Tata Power’s stock was flat, analysts note that any acceleration in renewable‑energy subsidies could create a tailwind similar to Reliance’s telecom‑digital synergy. Adani Green, already a beneficiary of green‑bond inflows, may see incremental foreign‑portfolio interest if the budget’s fiscal prudence eases concerns over capital‑flow volatility.
Rupee Strength and Bond Yield Moves: The Currency‑Risk Equation
The rupee appreciated 0.5% to ₹91.51 per dollar – its biggest single‑day gain since December – aided by central‑bank dollar sales and modest foreign inflows. A stronger rupee reduces the cost of imported inputs for Indian manufacturers, improving margins for sectors ranging from pharma to auto components.
Simultaneously, the 10‑year government bond yield rose to 6.77%, the highest level since March 2025. Higher yields typically pressure equity valuations, but in this case they reflect a nuanced market view: investors price in the budget’s higher borrowing while still rewarding equities that can out‑pace inflation. For portfolio construction, a rising yield environment suggests a tilt toward growth stocks with robust cash‑flow generation and away from ultra‑high‑beta speculative plays.
Technical Rebound and Short‑Covering: What the Charts Are Whispering
On the technical front, the Nifty breached the 25,000 level, a key psychological barrier, after sliding into oversold territory (RSI below 30) on Sunday. The subsequent short‑covering surge lifted the index by over 400 points, creating a classic “short‑squeeze” pattern.
Resistance now sits near the 200‑day moving average (DMA) at 25,210, while immediate support lies at 24,800‑24,680. Volume‑weighted average price (VWAP) analysis shows buying pressure consolidating above 24,700, suggesting the next leg could target 25,250‑25,350 if the momentum stays intact. Conversely, a break below 24,680 could trigger a risk‑off move, pulling the market back toward the 24,300‑24,200 range.
Investor Playbook: Bull vs. Bear Cases for the Coming Weeks
Bull Case: The budget’s infrastructure focus fuels order‑flow for L&T and its peers, while Reliance’s telecom‑digital ecosystem captures rising data consumption. A firm rupee and stabilising yields support equity risk‑premia. If the Nifty holds above 25,200, expect fresh inflows into large‑cap growth names and a rally in mid‑cap tech stocks.
Bear Case: Persistent global tension, a surprise rise in FY27 borrowing cost, or a sudden reversal in rupee gains could reignite risk‑aversion. A breach of the 24,680 support level would likely trigger stop‑loss cascades, dragging the Sensex back below 81,200. In that scenario, defensive sectors—consumer staples, utilities and pharma—might outperform.
Bottom line: The Monday bounce is more than a statistical blip; it reflects a convergence of policy continuity, heavyweight earnings resilience, currency strength and technical vindication. Savvy investors should position for upside while keeping a tight stop‑loss near the 24,700‑24,680 support band to guard against a rapid downside swing.