The BSE Sensex erased early gains and closed slightly lower at 80,500 on Monday, continuing the pullback that began on Friday from last week’s record highs. The markets are in a cautious mode as they await key earnings reports and the release of India’s Union Budget tomorrow. This budget is poised to be a significant test for the recent rally in Indian assets, which has been partly driven by substantial foreign investment flows attracted by strong economic growth and a stable fiscal position of the government.

The forthcoming budget will be scrutinized for the extent of government handouts, which will serve as an indication of how much influence Prime Minister Narendra Modi had to yield to the National Democratic Alliance (NDA) parties to secure his new government. Market participants are particularly attentive to this aspect, as it could impact the fiscal discipline and future investment landscape of India.

On the corporate front, Reliance Industries witnessed a significant drop of 3.4% following the release of its results, which indicated a contraction in retail operations to their lowest level in several quarters. The disappointment in Reliance’s performance added to the cautious sentiment in the market.

Additionally, Wipro shares plummeted by 9% due to pessimistic earnings, further weighing down the BSE Sensex. The significant losses in such heavyweight stocks contributed to the overall downward trend observed in the index.

As traders and investors await the budget announcement, the market’s attention remains fixed on the fiscal measures and government spending plans that will be unveiled. The outcome of the budget could significantly influence market sentiment and the direction of Indian assets in the near term.

In summary, the slight decline in the BSE Sensex reflects the market's cautious stance ahead of India’s Union Budget, with significant focus on fiscal policies and government handouts that could shape the economic and investment environment moving forward.

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