Budget panic, Trump euphoria, and what long-term investors should ignore
Forty-eight hours can change sentiment, and how. On Sunday, Finance Minister Nirmala Sitharaman delivered her ninth consecutive budget, and markets responded by wiping out Rs 10 lakh crore in investor wealth—the worst Budget-day showing in six years. By Monday night, a single Truth Social post from Mar-a-Lago had Gift Nifty futures screaming 700 points higher, which sets up what traders call “Terrific Tuesday.”
The Truth Social post announced tariff relief. The same market that wiped out a clean Rs 10 lakh crore on Saturday now scrambles to buy back what it sold in panic.
“It was an Honor to speak with Prime Minister Modi, of India, this morning,” Trump posted. “He is one of my greatest friends and, a Powerful and Respected Leader of his Country.”
The key number: Tarriff down to 18% from 25%. “Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal,” Trump posted on Truth Social.
Modi’s own response was notably thinner. “Delighted that Made in India products will now have a reduced tariff of 18%,” he posted. That’s it. No mention of Russian oil. No $500 billion. No zero tariffs.
The Market Backdrop
The budget selloff deserves a second look now that the panic has cleared.
Sitharaman raised the Securities Transaction Tax on derivatives. Futures levies jumped to 0.05% from 0.02%. Options rose to 0.15% from 0.10%. Traders revolted. The Sensex dropped 1,547 points. Goldman called it the worst Budget-day performance in six years.
But what was the actual crime? The government made speculation more expensive. In a market where retail punters have been bleeding money on weekly options—where SEBI has issued warning after warning about F&O losses—higher transaction costs, the authorities justify, is not irrational.
Foreign portfolio investors have pulled $23 billion since January 2025. That exodus didn’t start with the STT hike and won’t end with a Trump post. FPIs are leaving because valuations got stretched, earnings disappointed, and the rupee kept sliding. Those problems remain.
But what really matters
Here’s what actually matters for long-term wealth builders: nothing that happened this week changed India’s fundamentals. Not the budget. Not the tweet.
The economy is still growing around 6.5%. Corporate earnings are still recovering, albeit slower than hoped. Infrastructure spending continues at ₹12 lakh crore annually. The demographic dividend—400 million people entering prime working age over the next decade—hasn’t been repealed.
What changed is sentiment. And sentiment is a terrible compass.
On Sunday, sentiment said India was uninvestable. STT hikes would kill volumes. FPIs would never return. The budget betrayed markets.
On Tuesday, sentiment says India is back. Trump loves Modi. Tariffs are falling. Buy everything.
Both stories are overwrought. The truth is more mundane: India is a middle-income country with genuine structural tailwinds, genuine structural problems, and a stock market that periodically loses its mind in both directions.
The case for buying dips hasn’t changed.
When the Nifty fell 2% on Budget day, it wasn’t because India’s long-term prospects suddenly darkened. It was because leveraged traders got squeezed and algorithms followed momentum. The companies in the index—their factories, their customers, their order books—were exactly the same on Monday as they were on Friday.
Market dips are not a considered reassessment of value, but a flushing of weak hands.
Those who bought Sunday’s close didn’t know Trump would tweet Monday night. They simply understood that panic selling into a budget provision about derivatives taxation was unlikely to be a permanent impairment of value.
It’s the discipline that compounds wealth. Not predicting Trump posts, but recognising when price has divorced from reality.
The tariff relief is real but modest. At 18%, Indian goods still face higher duties than Southeast Asian competitors.
And the Russian oil question will linger. India imports over a million barrels daily from Russia. Redirecting that flow requires alternative supply, refinery adjustments, and price negotiations that don’t happen overnight. Expect quiet workarounds rather than dramatic compliance.
None of this is catastrophic. But none of it justifies the 700-point futures gap either.
What should investors actually do?
First, ignore the noise. A budget that raises transaction taxes is not an economic crisis. A Trump post is not an investment thesis. Both events will be forgotten in a month while the underlying business cycle grinds forward.
Second, buy weakness. The Nifty at 24,800—where it closed Sunday—is cheaper than the Nifty at 25,600, where it will likely open Tuesday. Investors who can stomach volatility should welcome selloffs, not fear them.
Third, extend your horizon. The traders panicking about STT hikes are operating on days. The FPIs pulling money are operating on quarters. Wealth compounds over decades. At that timescale, whether tariffs are 18% or 25% matters far less than whether India’s companies can keep growing earnings at 12-15% annually.
Fourth, stay diversified. India’s market is increasingly correlated to global risk appetite, Trump’s moods, and oil prices. No single-asset class bet—however compelling the long-term story—deserves an entire portfolio.
