India's Nifty 50 index experienced its worst budget-day performance in six years, plunging 2.5% as investors reacted to a surprise hike in transaction taxes. The move caught many off guard, leading to a broad selloff across sectors. Investors are particularly concerned about the impact on market liquidity and trading volumes, which are already under pressure from global economic uncertainties.

The tax increase, announced as part of the latest budget, targets both equities and commodities, with silver and gold ETFs seeing sharp declines. This has exacerbated worries about the overall investment climate in India, which has been grappling with foreign investor pullbacks and domestic consumption slowdowns.

Market analysts warn that the tax hike could deter both retail and institutional investors, potentially leading to lower market participation. With the upcoming earnings season, companies may face additional headwinds as investors reassess valuations in light of the new tax regime. Analysts suggest monitoring foreign capital flows and domestic market sentiment closely in the coming weeks.