Stock Market Crash: Sometimes the stock market behaves as if someone has suddenly slammed on the brakes. A similar scenario unfolded on Budget Day. The market started on a positive note in the morning, with investors hopeful, but as the budget announcements progressed, the atmosphere changed.
Within a few hours, the market slipped from the green into the red, and investors lost crores of rupees. The question is, what exactly happened that caused the market to surprise everyone on Budget Day?
Profit-taking spoiled the game
Before the budget, the stock market had already risen significantly. Many large investors were sitting on substantial profits and felt uncertain about the budget’s impact. As soon as the Finance Minister began her speech, many investors started selling their shares rather than taking risks.
Stock Market Crash. This is known as profit-taking. When a large volume of shares is sold, it puts pressure on the market, and a decline begins. This is why the initial surge disappeared within a short time.
The old relationship between the budget and the market
Looking at the records of previous years, it is clear that the stock market is rarely calm on Budget Day. In the last 15 years, the Nifty has experienced sharp fluctuations on Budget Day most of the time.
The reason is clear: the budget involves decisions related to taxes, expenditure, and deficits, which directly affect companies’ profits and investors’ sentiment. The market oscillates between this fear and hope.
India VIX increased the anxiety
On Budget Day, the India VIX saw a tremendous surge. The India VIX is considered the market’s fear gauge. When it rises, it means that anxiety among investors is increasing.
his time, it rose by more than 17 percent, clearly indicating that the market was uncertain about what would happen next. In such an environment, people prefer to play it safe and start selling shares.
Expectations regarding taxes were not met
This time, ordinary investors were hoping for tax relief from the budget. But as soon as it became clear that there were no major changes in the income tax slabs, the market’s mood worsened further.
The lack of relief, especially for the middle class and salaried individuals, put pressure on consumer sector stocks. This further deepened the negative sentiment in the market.
Fear and Uncertainty Fueled the Sell-off
The stock market is driven by sentiment, and these sentiments dominated on budget day. Profit-taking on one hand, disappointment over taxes on the other, and weak global cues – all combined to scare investors. As a result, people started selling shares rapidly to protect their investments, and the market plummeted.
Disclaimer: This article is for general information and educational purposes only. The information provided herein does not constitute investment advice. Investing in the stock market is subject to risk; therefore, please consult your financial advisor before making any investment decisions.
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