This article analyses the dynamic relationship between fiscal deficit, market capitalization, and equity derivatives turnover. Using Vector Autoregressive (VAR) modelling and Granger causality tests, we analyse the two-way dynamics between these variables over time. Our findings reveal that fiscal deficit levels reduce market capitalization, suggesting that high deficits reduce investors' confidence and reduce market values. On the other hand, turnover of equity is highly sensitive to past levels of market capitalization, suggesting that market activity tends to linger in the long term. However, the size of the fiscal deficit does not appear to affect turnover much. The results shows that fiscal policy is significant in market conditions and fiscal stability plays a significant role in financial markets. Policymakers should be sensitive to shortfalls in their finances so that markets do not fail and investors still have faith.