Stock markets plummet on Union Budget’s STT hike

The Union Budget of 2026-27 turned out to be a negative surprise for the Indian stock markets, with Finance Minister Nirmala Sitharaman proposing an increase in securities transactions tax (STT) on the futures and options trading segment.

The stock markets were holding up till the announcement of the Union Budget and declined sharply the moment the Finance Minister announced the increase in STT.

“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,” the finance minister said in her budget speech.

The BSE Sensex was down 2.12% on Sunday, and the Nifty 50 was down by 1.96%. The markets were specially opened on Sunday primarily due to the presentation of the Union Budget.

This decline in the market indexes was also reflected in the various sector indices also where an overwhelming number were in the red except for one or two exceptions like IT and consumer durables. The IT index was up primarily due the tax sops announced in the Budget with regard to the establishment of data centres.

Industry observers did not have much expectations from the Union Budget this time and were hoping that there would be a maintenance of the status quo. The increase in STT is certainly being seen as an unexpected negative surprise, which is certainly a sentiment dampener. They also highlighted that the Indian stock markets were underperforming when compared to their global peers.

This increase in STT comes at a time when the stock markets are volatile and there has been an outflow of foreign capital from the country.

The impact of this move on the initial public offering (IPO) segment remains to be seen, given that 2025 was a good year in terms of Indian companies entering the stock market, especially for Indian startups.

In 2025, there were 18 startups that got listed on the stock markets, raising around Rs 41,000 crore, and there was an expectation that this momentum would continue even in 2026. Now, given the manner in which the stock markets are trading, there is a possibility of a slowdown in IPOs.