India’s equity markets recover after sharp Budget-day selloff, with Sensex and Nifty posting strong weekly gains. The rupee logs its biggest weekly rally in over three years amid trade optimism and RBI policy clarity, even as IT stocks lag
India’s financial markets swung between sharp volatility and resilient recoveries this week, navigating policy shocks and renewed optimism. Benchmark indices ended on firm footing, while the Indian rupee posted its strongest weekly gain in over three years, bolstered by trade optimism and clearer domestic policy signals.
Budget jitters trigger early volatility
Markets opened the week reeling from the Union Budget 2026. A surprise hike in the Securities Transaction Tax (STT) on derivatives triggered one of the steepest Budget-day selloffs in recent memory, wiping out significant market capitalisation.
By Monday, however, investors returned with bargain buying. The BSE Sensex jumped 943.5 points, or 1.17 per cent, to 81,666, while the NSE Nifty50 rose 262.9 points, or 1.06 per cent, to 25,088. The swift rebound reflected investor focus on corporate earnings and selective sector allocation, rather than headline risks alone.
Midweek gains on trade optimism
Tuesday saw one of the week’s strongest sessions. Optimism over an India–U.S. trade deal easing export barriers and tariff costs lifted markets. The Sensex surged 2.5 per cent to 83,739, and the Nifty50 gained 2.55 per cent to 25,727.
Wednesday brought consolidation. The Sensex inched up to 83,817, and the Nifty50 settled near 25,776. Market breadth was mixed: IT stocks underperformed amid global tech headwinds, while financials and consumer staples provided steady support.
RBI clarity drives end-of-week rally
Thursday trading remained subdued, with investors cautious ahead of the Reserve Bank of India’s Monetary Policy Committee meeting. Elevated sensitivity to policy and global cues kept activity tentative.
Friday’s announcement removed much of this uncertainty. The RBI held the repo rate steady at 5.25 per cent and maintained a neutral policy stance, boosting risk appetite. The Sensex added 266 points, or 0.32 per cent, to 83,580, while the Nifty50 closed above 25,650, up 0.20 per cent. Both indices recorded weekly gains of 1.5 per cent—the strongest in nearly three months.
Sector trends: Divergence persists
While headline indices advanced, sector performance varied sharply. IT stocks fell amid global AI-related concerns, making the IT sub-index one of the weakest performers. Financials, consumer staples, and cyclical sectors cushioned the broader market, limiting overall downside.
Rupee posts multi-year weekly gain
The Indian rupee strengthened sharply, closing Friday at 90.6550 per US dollar. Despite a modest daily retreat, the currency gained 1.4 per cent over the week, its best weekly performance since early 2023. The INR strengthened from 91.2 at the start of the week to 90.18 by Friday, highlighting improved macro confidence and positive trade sentiment.
Key drivers
Domestic policy signals were central to market movements. The initial Budget selloff was quickly absorbed as investors reassessed earnings implications. The RBI’s rate hold removed a major policy overhang, supporting equities.
Global factors also played a role. Positive sentiment around the India–US trade deal boosted markets, while tech sector weakness weighed on IT stocks. Currency flows reflected this risk appetite, with the rupee appreciating even amid pockets of dollar demand.
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