Budget 2026: STT Hike Triggers Market Crash

The Indian government proposed to increase the Securities Transaction Tax (STT) on futures and options in the recent Budget.

This tax hike aims to reduce speculative trading, which often leads to losses for small and retail investors.

Over 90% of retail investors in the F&O segment lose money.

The increase in STT is expected to make high-volume derivative trading more expensive, which might discourage excessive speculation.

However, some experts believe this could also reduce participation from foreign investors in the short term.

After the announcement, the stock market initially dropped significantly, with the Sensex crashing by 2,370 points and the Nifty falling by 495.20 points.

Some of the major losers included State Bank of India, Adani Ports, and Reliance Industries, while TCS, Infosys, Sun Pharma, and Titan were among the gainers.

The hike is also expected to impact brokers, with discount brokers being more affected than full-service brokers.

The Nifty 50 suffered a 2%, or 500-point, crash, falling below the psychological level of 25,000 to 24,825 points, marking its weakest budget performance since 2020.

The market reaction was triggered by the STT hike, increased government borrowing, and the lack of major reforms to attract overseas investors.

The government also focused on boosting manufacturing and kept the fiscal deficit target at 4.3%.