Budget Weekend Chaos. Liquidation, Panic, Opportunity?

Markets Overview

This weekend is an unusual one because it is an extended trading week, with the Union Budget scheduled on Sunday. Adding to the uncertainty, late on the night of 30th January, there was a sharp crash in the precious metals space, which has caused significant nervousness across markets. What we witnessed was a classic liquidation event — margin calls triggering forced selling, leading to a sudden and violent unwinding of leveraged positions. Silver, in particular, collapsed nearly 35% overnight, while gold also fell sharply from its recent highs. From a historical perspective, this ranks among the largest liquidation events since the 1980s, underscoring how stretched positioning had become.

The broader context here is extremely important. A new Federal Reserve Chair is set to take charge, and social media is flooded with clips and commentary portraying him as aggressively hawkish — with phrases like “let assets crash” and “a phoenix will rise from the ashes” doing the rounds. However, this interpretation misses a key political reality. This individual has been brought in by President Trump specifically to counter the existing Fed stance, which Trump believes has failed to cut rates aggressively enough. In my view, there is very little doubt that this new Fed Chair will ultimately cut interest rates, and it is somewhat baffling that markets are currently reading him as hawkish rather than accommodative.

Sunday’s Budget session itself is likely to be chaotic for markets. International markets will be closed, which means ETF pricing — especially for gold and silver ETFs — will be based on assumptions rather than real-time global price discovery. On top of that, there is the possibility of changes in import duties on precious metals, which could cause sharp mispricing in ETFs during Sunday’s session. ETF-NAV dislocations are therefore a major risk. What’s also striking is how subdued market sentiment is heading into the Budget. This raises the question: does the market already believe that the Budget will be disappointing? FIIs have not covered their short positions ahead of the Budget, which suggests positioning is skewed toward downside expectations. Ironically, this also sets the stage for a sharp upside surprise if even modestly positive announcements are made. Markets often surprise when consensus is heavily tilted one way — just as we recently saw in precious metals. In my view, even relatively simple measures — such as reducing STT without touching LTCG, or increasing middle-class tax slabs — could materially boost consumption without straining the fiscal balance. The real trigger will arrive on Sunday, and we’ll soon see the direction the Finance Minister chooses.

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Precious metals and the broader metals and commodities markets have experienced a collapse. After an extremely robust run over the last three days, the entire gain of that period has been given up. The fall from the top in gold prices is dramatic, dropping about $600 from 5,600 to near the $5,000 level.

The main trigger for this volatility is that President Trump is likely announcing the next Fed chair tonight. This announcement is critical as it hinges upon whether the incoming chair is dovish or hawkish, how they will handle interest rates, and how the balance sheet will be managed.

Rebalance Update for the week

Note : Rebalance update for both weekly & monthly rebalanced strategies will be updated here by tomorrow end of day (01 Feb 2026) post Budget session.