Indian equity markets will be in focus today as a special trading session is held on Sunday, February 1, 2026, with Finance Minister Nirmala Sitharaman presenting the Union Budget 2026 in Parliament at 11 am. The Budget session marks a rare moment in market history, being only the second time since Independence that Indian stock markets are open on a Sunday, the previous instance being Budget Day on February 28, 1999.

On Friday, domestic equities ended lower, snapping a three-day winning streak, as investors turned cautious ahead of the Budget. The NSE Nifty50 slipped 0.39%, or 98.25 points, to close at 25,320.65, while the Sensex declined 0.36%, or 296.59 points, to settle at 82,269.78. Persistent foreign fund outflows, currency weakness and uncertain global growth signals weighed on sentiment.

Sensex, Nifty fall up to 3% in Jan

On a monthly basis, benchmark indices declined by up to 3%, marking their weakest January performance in several years. Historical data shows this was the worst January showing for both the Sensex and the Nifty50 since 2021, as heightened volatility ahead of the Budget along with escalated geopolitical tensions kept investors on edge.

On the global front, U.S. equity markets ended lower on Friday as investors digested President Donald Trump’s nomination of Kevin Warsh as Federal Reserve Chair, alongside a stronger-than-expected inflation print. The S&P 500 declined 29.98 points, the Dow Jones Industrial Average fell 179.09 points, while the Nasdaq Composite dropped 223.31 points.

FIIs outflow continues

Foreign portfolio investors (FPI) selling continued in January, with net outflows through exchanges reaching ₹38,740 crore, though the pace of selling eased towards the end of the month, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He noted that FIIs are likely to await cues from the Union Budget before deciding their investment strategy.

Vijayakumar said the Economic Survey’s upbeat growth outlook, coupled with moderate inflation, could support corporate earnings in FY27. A fiscally prudent and growth-oriented Budget could lend resilience to markets, while a sustained correction in gold and silver prices may prompt a shift in investor preference towards equities.

Key sectors and stocks to watch today:

Auto stocks: Shares of automobile companies will be in focus today as most players are set to announce their monthly sales numbers, which could provide fresh cues on demand trends and pricing momentum across segments.

Railway stocks: State-owned railway-linked stocks such as Indian Railway Finance Corporation (IRFC), Rail Vikas Nigam Ltd (RVNL), IRCTC, IRCON, and RailTel are expected to remain in the spotlight, along with select wagon makers and EPC players including Jindal Rail Infrastructure, Texmaco Rail & Engineering, Titagarh Rail Systems and Larsen & Toubro (L&T). The focus comes amid expectations of continued government support for railway infrastructure expansion and operational efficiency.

Defence stocks: Defence-related shares are likely to see heightened action as market participants anticipate a push for higher capital expenditure in the sector. Stocks such as Hindustan Aeronautics (HAL), Bharat Electronics, Cochin Shipyard, Paras Defence, Garden Reach Shipbuilders, Zen Technologies, Data Patterns and others will be closely tracked ahead of the Budget announcements.

According to Motilal Oswal, the Budget is likely to focus on higher capex across sectors such as defence, infrastructure, affordable housing, power and capital goods, alongside a few capital market measures aimed at improving investor sentiment. The brokerage also expects steps to aid credit flows to microfinance institutions (MFIs), MSME loans and housing finance, along with procedural reforms to improve ease of living and ease of doing business.

Cement and building material stocks, including UltraTech Cement and JK Cement, could also gain, while electricals and cables players such as Polycab, KEI Industries and Crompton Greaves remain in focus. On the consumption side, jewellery and discretionary names like Titan and PN Gadgil are expected to benefit.

In financials, Motilal Oswal highlighted Niva Bupa, asset management companies, registrar and transfer agents, most housing finance companies and microfinance institutions. Within energy, city gas distributors such as IGL, Mahanagar Gas and Gujarat Gas, along with Petronet LNG and GAIL, are seen as potential beneficiaries.

The brokerage also sees upside in renewable energy and power names including Waaree, Premier Energies, NTPC, Tata Power, Acme and NTPC Green. Real estate developers such as Brigade Enterprises, Prestige Group, Sobha, Lodha and Godrej Properties were also flagged as stocks to watch.

Nuvama maintained a defensive bias with overweight positions in telecom, internet, IT, consumer, cement and chemicals, while remaining underweight on BFSI, industrials, autos and power.

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