Indices down 2% as pre-Budget selling wipes off Rs 12 lakh crore investor wealth

The broader markets were also caught in the bear trap with the BSE Midcap and Smallcap indices declining 1.5 percent and 2.5 percent, respectively as breadth was largely in the favour of sellers. Nearly 5 shares declined for every share rising on the BSE.

All sectors, barring Auto, participated in the correction with Energy, Utilities, Oil & Gas, and Power indices being the major losers, falling 6-7 percent. Bank, Capital Goods and Commodities were down between 2 percent and 3 percent.

Most experts feel this is a general trait of the market wherein it drastically corrects before the Budget, followed by a sharp recovery post Budget. Hence, we need to closely watch the market mood going ahead.

Another event to watch out for would be the outcome of the FOMC meet scheduled on February 1 late night. Fed officials have already warned of aggressive rate hikes to reduce inflation further, though experts feel we are close to the end of the rate hike cycle.

What the Budget 2023-24 entails?

Most experts believe the Budget will take a balanced approach towards fiscal consolidation and economic growth while focusing more on capital expenditure on infrastructure (including defence, railway, roads etc), widening production-linked incentive schemes for more sectors, boosting rural demand and divestment targets.

Any tweak to capital gains tax or its tenure structure would also be keenly watched by the Street.

"Higher allocation to capital expenditure; increase in allocation for PLI scheme to select manufacturing segments; higher MNGREGA allocation given the sluggish rural economy; changes income tax slab to provide relief to the middle class in an inflationary environment; and focus on the monetization of non-core assets of public sector and central government entities to invest in Railways and other logistics infrastructure are likely policy measures in the Budget to boost economic growth," Gaurav Dua, Head of Capital Market Strategy at Sharekhan by BNP Paribas said.

Among stocks, Adani Green Energy, Adani Total Gas, Adani Transmission and Dixon Technologies were the biggest losers in the Nifty500 as all of them were locked in the 20 percent lower circuit. Further, Adani Ports, Ambuja Cements, Adani Enterprises, ACC and Indus Towers cracked 13-18 percent.

In the Nifty50, apart from Adani Ports and Adani Enterprises, State Bank of India, and ICICI Bank were key losers falling more than 4 percent, dragging the Bank Nifty near the psychological 40,000 mark as breaking which can bring more selling pressure in the market.

Among others, BPCL, ONGC, Asian Paints, IndusInd Bank, Hindalco Industries, HDFC, Axis Bank, Coal India, HDFC Bank, and Kotak Mahindra Bank corrected 2-3 percent.

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