Gold, Silver Prices Crash as Sensex Rallies 900 Points: Should Investors Buy Equities or Focus on Wealth Protection?
Gold and silver prices witnessed a sharp sell-off on Monday even as Indian equity markets staged a strong rebound, pushing the Sensex up by more than 900 points. The contrasting movement across asset classes has left investors grappling with a key question: Is this the right time to increase exposure to equities, or should wealth protection remain the priority?
Sensex, Nifty Extend Post-Budget Rally
Equity benchmark indices surged on February 2, driven largely by buying in select large-cap stocks following the Union Budget 2026. The Sensex jumped 944 points, or 1.17%, to close at 81,666, while the Nifty 50 gained 1.06% to end at 25,088.
Broader markets also participated in the rally, though gains were relatively modest. The BSE 150 MidCap Index rose 0.86%, while the BSE 250 SmallCap Index added 0.28%.
Gold, Silver Prices See Steep Decline
In contrast, precious metals came under heavy pressure. MCX Gold February futures have fallen by more than ₹47,000, or 26%, per 10 grams from their peak levels. Meanwhile, MCX Silver March futures have declined by nearly ₹1.94 lakh, or over 46%, per kilogram from their highs.
The sharp correction in gold and silver has weakened the traditional safe-haven appeal of precious metals, at least in the short term.
Budget 2026 Boosts Market Sentiment
Market experts attribute the equity rally primarily to the Union Budget 2026, which struck a balance between growth and fiscal discipline. Finance Minister Nirmala Sitharaman avoided populist measures and stayed focused on long-term economic stability, a move that boosted investor confidence.
According to experts, the government’s continued emphasis on capital expenditure across sunrise sectors such as semiconductors, data centres, infrastructure, shipping, railways, electronics, and biopharma has strengthened the outlook for long-term growth.
The fiscal deficit target was marginally improved to 4.3%, reinforcing confidence in India’s macroeconomic stability.
STT Hike on F&O: Short-Term Pain, Long-Term Intent
The hike in Securities Transaction Tax (STT) on futures and options (F&O) trading disappointed market participants initially, but the reaction remained short-lived.
Experts believe the move is not aimed at revenue generation but at discouraging excessive retail participation in the derivatives segment, where a large majority of traders incur losses. Importantly, transaction taxes on cash equity trades were left unchanged, limiting the broader market impact.
Should Investors Increase Equity Exposure Now?
Market participants remain cautious amid global uncertainties, including geopolitical risks and concerns over potential tariff actions by the US. Experts advise investors to align their strategy with their investment horizon.
Short-term investors may prefer to stay on the sidelines due to elevated volatility. However, long-term investors can consider accumulating quality large-cap stocks on declines, especially in sectors with strong earnings visibility.
Historically, large-cap stocks have shown greater resilience during uncertain periods and tend to recover faster once market conditions stabilise. In contrast, small-cap stocks often experience prolonged downturns during global stress phases.
Large Caps Offer Stability, Valuation Comfort
Experts note that valuation comfort is currently better in large-cap stocks compared to mid- and small-cap segments, where pockets of overvaluation still exist. Banking, metals, energy, and capital goods are among the sectors that analysts believe offer better risk-reward for medium- to long-term investors.
With expectations of an earnings recovery in the second half of the year and projected earnings growth of over 15% for the broader market in FY27, selective accumulation of fundamentally strong stocks could prove beneficial.
Bottom Line
While the sharp fall in gold and silver prices highlights short-term volatility, the post-Budget rally in equities reflects improving long-term confidence in India’s growth story. For investors, the current phase may not be about aggressive risk-taking, but about disciplined allocation—focusing on quality, valuations, and long-term fundamentals.
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