Budget 2026, stock market: Sensex, Nifty plunge 2% after STT hike on F&O trades

Union Budget 2026: Domestic equity benchmarks Sensex and Nifty slipped on Sunday after Finance Minister Nirmala Sitharaman announced a hike in the Securities Transaction Tax (STT) on derivatives. The STT for futures trades has been raised to 0.05% from 0.02%, weighing on market sentiment, particularly in the F&O segment.

At 12:28 am, the BSE Sensex plunged 1656.22 points, or 0.96%, to 80,613.56. The NSE Nifty slipped 534.25 points, or 2.11%, to 24,786.40.

The steep increase in STT on futures and options, which follows last year's hike, is likely to increase impact costs for traders, hedgers, and arbitrageurs. This could cool derivative activity and lead to a reduction in volumes, said Shripal Shah, MD & CEO, Kotak Securities.

“The intent appears to be volume moderation rather than revenue maximisation, as any potential revenue gain could be offset by lower derivative volumes,” Shah said.

Among Sensex constituents, Bharat Electronics slipped 8.24% to Rs 412. State Bank of India (SBI) declined 4.77%, while HCL Technologies, NTPC and L&T down 3.34%, 3.34% and 3%, respectively.

The rise in Securities Transaction Tax (STT), particularly in futures and options, is probably going to have a minor negative impact on foreign portfolio investor (FPI) flows in the near future, especially for high-frequency and derivative-focused global funds, said Aakash Shah, Technical Research Analyst at Choice Equity Broking.

Nilesh Shah, Managing Director of Kotak Mahindra AMC, said that this budget proposes a capital expenditure of Rs 12.10 lakh crore, which exceeds the net market borrowing of Rs 11.70 lakh crore. 

“I pray that a path is laid where one day capital expenditure will be more than the total borrowing including small savings,” Shah said.

Varun Gupta, CEO, Groww Mutual Fund, on fiscal consolidation, said “the continued glide path on fiscal consolidation, with the deficit projected at 4.3% of GDP, reflects a clear commitment to balancing growth with long-term macro stability.”