Trade Setup for February 2: Nifty braces for further pressure as FIIs return from holiday after STT hike

Indian equity markets witnessed a sharp sell-off during the special Union Budget session after Finance Minister Nirmala Sitharaman announced a steep hike of up to 150% in the Securities Transaction Tax (STT) on Futures and Options trades.

The announcement triggered panic selling, dragging the Nifty 50 to an intraday low of 24,572.

The benchmark index had remained largely stable until the Finance Minister began her budget speech. Post 11 am, sentiment turned decisively negative, with the Nifty plunging 869 points from its intraday high within just 90 minutes.

Although a mid-session rebound helped the index recover 577 points to 25,148, the relief proved short-lived as renewed selling pressure erased more than 400 points.

Despite clawing back over 500 points from the day's lows, the Nifty 50 ultimately closed 495 points lower, or down 1.96%, at 24,825, its lowest closing level in four months.

This also marked the index's steepest single-day percentage decline since April 7, 2025.

The primary trigger for the sell-off was the unexpected proposal to sharply raise STT on F&O trades, a move aimed at curbing excessive retail speculation but one that caught markets off-guard.

The sell-off wiped out nearly ₹11 lakh crore in market capitalisation of BSE-listed companies in a single session.

Among Nifty constituents, Wipro, Max Healthcare, and TCS bucked the broader trend to emerge as top gainers, while BEL, Hindalco, and ONGC were the worst performers.

Sectorally, only the Nifty IT index managed to stay in the green. All other sectoral indices closed lower, with PSU Banks, Metals, and Oil & Gas stocks bearing the brunt of the decline.

PSU bank stocks were rattled by higher government borrowing targets, stoking concerns over rising bond yields and mark-to-market (MTM) losses on bond portfolios.

Metal stocks tumbled after copper futures on the MCX slid over 5%, while gold and silver futures plunged more than 5% and 9%, respectively.

The sell-off was even more pronounced in the broader market, with the Nifty Midcap 100 falling 2.24% and the Smallcap 100 sinking 2.73%.

Indian equities continued to underperform global peers in 2025, with the Nifty 50 up just 10% year-to-date, compared with gains ranging from 20% to as high as 65% in global markets such as South Korea's KOSPI.

Market participants also flagged concerns over currency weakness, with expectations that the rupee could depreciate by another 1%. Notably, currency markets remained closed for the day.

On the technical front, Nandish Shah of HDFC Securities said the Nifty has decisively broken below its consolidation range of 24,900-25,450.

The index has also slipped below its 200-day SMA and EMA, signalling a resumption of a positional downtrend.

According to Shah, immediate support levels are seen at 24,571 and 24,337, while resistance is expected in the 25,000–25,150 zone in the short term.

Meanwhile, Sudeep Shah of SBI Securities said the 24,700-24,650 range is likely to act as immediate support. A sustained move below 24,650 could intensify downside momentum, potentially dragging the index toward 24,500 and then 24,350 in the near term.