Nifty falls over 1%, Sensex tumbles 750 points after Union Budget 2025: Here's why

Indian equity benchmarks- Sensex and Nifty in Monday's trade (February 3) fell sharply following the annual Budget exercise. Nifty at the day's low tanked as much as 1.11 per cent to 23,222, while the Sensex plummeted 0.97 per cent striking the day's low of 76,756. Nevertheless, indices posted mild recovery after sharp losses.

Meanwhile, broader markets also continued to bleed, with the Nifty Smallcap 100 index down nearly 2 per cent at the last count.

Here are the likely reasons for the sharp drag in the Indian stock market today:

Add Zee Business as a Preferred Source

Trump levies tariffs on Mexico, Canada and China

Trump has levied a 25 per cent tariff on Canadian and Mexican imports as well as an additional 10 per cent tax on Chinese goods and the same would come into force from Tuesday (February 4). However, Canadian energy faces a lower 10 per cent tariff.

The US president clarified that the move was in response to his concerns around illegal immigration and drug trafficking.

"Markets may see a gap down opening due to weakness in US and Asian indices after US President Donald Trump announced tariffs on Canada, Mexico and Chinese goods, which could result in retaliatory measures from these countries on US imports," said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

The sentimental impact may fuel pessimism in domestic markets on fears that similar US measures could be imposed on Indian imports as mentioned during his pre-election campaigns, he added.

Across-the-board sell-off

All the sectors barring consumer durables traded with deep cuts, led by the metal and energy pack. Nifty Metal index was down over 2 per cent after the US President imposed tariffs on China, Canada and Mexico, potentially triggering a trade war and hampering global economic growth.

Lower-than-estimated capex allocation in Budget 2025

For FY26, Finance Minister Nirmala Sitharaman, in her Budget 2025 announcement, raised the capex target to Rs 11.2 trillion, which was lower than expected.

Rupee slumps to new low against greenback

Tracking the global currency market trend, the domestic unit registered a record low of 87.29 in early trade today. This fall was triggered on the back of the trade war between the US and its trade partners like Canada, Mexico and China.

Traders amid strong demand for the dollar anticipate further downside in the domestic currency.

Spike in dollar index to trigger FII selling

The US dollar index (DXY) last traded with gains of over 1 per cent at 109.53 as Trump's tariff impositions spurred the demand for safe-haven asset- dollar.

But the spike in the dollar index to above 109.6 will trigger more selling by FIIs putting the market under pressure, said

Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services