Union Budget 2026: What caused Sensex, Nifty to crash after Sitharaman's budget announcement?
&imwidth=600&imheight=450&format=webp&quality=medium "Union Budget 2026: What caused Sensex, Nifty to crash after Sitharaman's budget announcement?")
Bombay stock exchange Photograph: (ANI)
Due to the new Budget proposals introduced by Nirmala Sitharaman, STT on futures contracts will jump to 0.05% from 0.02%.
Finance Minister Nirmala Sitharaman presented the Union Budget 2026-2027 in the parliament on Sunday (Feb 1). Several economic announcements to boost growth were made but the markets did not respond in positive. The Sensex dropped over 2,300 points from the day’s high and the Nifty 50 slid to 24,571.75, largely due to the hike in the Securities Transaction Tax (STT). The market capitalisation of all listed companies on the BSE dropped by Rs 6 lakh crore to settle at Rs 453.87 lakh crore.
Due to the new Budget proposals introduced by Nirmala Sitharaman, STT on futures contracts will jump to 0.05% from 0.02%, while the tax on options premiums will increase to 0.15% from 0.10%. The levy on options exercised will also climb to 0.15% from 0.125%.
STT on options premium and exercise have been announced to be increased to 0.15% from the present rate of 0.1% and 0.125%, respectively.
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“I propose to raise the STT on Futures to 0.05% from the present 0.02%. STT on options premium and exercise of options are both proposed to be raised to 0.15% from the present rate of 0.1% and 0.125%, respectively,” said Sitharaman in her budget speech.
This led to intense selling, especially in stocks linked to trading, broking, and market participation, as investors reassessed the cost of trading in the derivatives segment.
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In every buy or sell transaction in the stock market, including shares, futures, and options the government implies a small Security Transaction Tax which has been hiked marginally leading to this trend (crash) in the market.
Though, this change might look slim it directly increases the cost of trading, particularly for frequent traders, hedgers, and arbitrageurs.
"The steep increase in STT on futures and options, coming on top of last year's hike, is likely to raise impact costs for traders, hedgers, and arbitrageurs. This could cool derivative activity and lead to a reduction in volumes," said Shripal Shah, Managing Director and CEO of Kotak Securities to news agaency ANI.
(With input from agencies)
