BSE, Groww, NSDL, IIFL Capital: Capital market stocks crash up 18% as FM ups STT on F&O

Shares of stock broking and exchanges including Angel One Ltd, Billionbrains Garage Ventures Ltd (Groww), BSE Ltd and others crashed up to 16 per cent during Sunday's trading session after the union finance minister Nirmala Sithaaman, announced to increase securities transaction tax (STT) on futures and options (F&O).

The Finance Minister said the STT on futures contracts will be increased, raising the rates to 0.05 per cent, marking a change in transaction costs for derivatives market participants. STT on options premium trading to 0.15 per cent from 0.1 per cent. Shares of depositories including National Securities Depository Ltd (NSDL) and Central Depository Services (India) Ltd (CDSL) also cracked up to 5 per cent.

Following the announcement of the same, Shares of BSE tanked more than 15 per cent to Rs 2,377.40, while shares of Groww crashed more than 14 per cent from day's high at Rs 184.30 to Rs 158.35. The total market capitalization of both the companies slipped below Rs 1 lakh crore.

Shares of Angel One tumbled 10 per cent to Rs 2284.70, with its market capitalization of barely holding Rs 20,000 crore. Shares of CDSL tumbled more than 9 per cent to Rs 1,196.30, while shares of NSDL were seen down 3 per cent lower. The stock has already been in pain. Shares of IIFL Capital Services (formerly known as IIFL Securities Ltd) tumbled nearly 18 per cent to Rs 273.55 for the day.

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, said Shripal Shah, MD & CEO at Kotak Securities. "This could cool derivative activity and lead to a reduction in volumes. The intent appears to be volume moderation rather than revenue maximisation, as any potential revenue gain could be offset by lower derivative volumes," he said.

Overall, while the STT hike may help boost tax collections, it risks dampening trading volumes and could slow tactical FPI participation. To meaningfully revive sustained FPI inflows, investors will be looking more closely at macro stability, rupee movement, and consistency in tax policy rather than just growth optics, said Aakash Shah, Technical Research Analyst at Choice Equity Broking.

Beside this, FM Finance Minister Nirmala Sitharaman announced that share buybacks will now be taxed as capital gains for all categories of shareholders, marking a shift in the tax treatment of buybacks and aligning them more closely with other equity income streams.

The Finance Minister’s proposal to raise STT on futures is structurally negative for the capital market ecosystem, particularly F&O-driven businesses. Higher transaction costs are likely to reduce trading volumes, dampen short-term momentum, and lower profitability for active market participants, said Raj Gaikar, Research Analyst at SAMCO Securities.

"FII participation in derivatives may also moderate as post-tax trading efficiency declines, impacting overall liquidity. This can create a cascading effect on revenue streams of broking companies, exchanges, AMCs, and depositories, which are closely linked to market turnover. The hike may further pressure near-term earnings visibility, It poses headwinds for capital-market-linked stocks," he adds.

These measures raise transaction costs and change the near-term economics for both traders and companies relying on buybacks as a capital-return tool, said Prasenjit Paul, Equity Research Analyst at Paul Asset & Fund Manager at 129 Wealth Fund. "While short-term volatility is inevitable, the underlying earnings visibility for infra , capital goods and manufacturing-linked sectors continues to improve."

We believe this will also affect a lot of FII investing in India where they use FNO majorly as a hedging mechanism, said Shashank Udupa, SEBI registered RA and Fund Manager at Smallcase. Overall this is a major setback to the growing capital market sector. 

"We might see Layoffs happening soon from major exchanges and capital market companies." This is surely going to impact all profitability mechanisms for capital market players and overall a net negative. Doubling STT in Futures and options while still keeping STCG and LTCG at elevated levels is extremely poor," he said.

The move is not aimed at long-term or delivery-based investors, who remain largely unaffected. It reinforces that capital markets should facilitate investment, hedging and efficient price discovery, rather than excessive leverage-driven trading, said Narinder Wadhwa, MD & CEO, Ski Capital Services. "The alignment of this measure with recent SEBI actions further highlights a coordinated approach towards reducing market froth and systemic risk.