Indian stock market indices experienced a significant downturn on Sunday following Finance Minister Nirmala Sitharaman’s proposal to raise the securities transaction tax (STT) on commodity Futures and Options trading in her Union Budget speech for 2026. The Bombay Stock Exchange’s Sensex plummeted by 1,546.84 points, slightly recovering from an initial dive of 1,700 points immediately after the announcement. Meanwhile, the National Stock Exchange’s Nifty fell by 495.20 points, or 1.96 percent, settling at 24,825.45.
The primary driver of the market’s decline was the steep drop in shares of brokerage-related companies, which nosedived by as much as 18 percent. On the BSE, Multi Commodity Exchange (MCX) shares fell 18.08 percent, closing at ₹2,068.40. Billionbrains Garage Ventures, the parent company of Groww, plunged 13 percent to ₹154, while IIFL Capital Services saw a decline of 10.4 percent, closing at ₹296.10. Other brokerage firms such as Angel One and Anand Rathi Share and Stock Brokers also faced significant downturns, with stock prices decreasing by 11.84 percent and 8.05 percent respectively.
Despite the widespread turmoil, some sectors saw gains. Notably, proposals aimed at making India a biopharma manufacturing hub and incentives for establishing mega textile parks and a ship-repair ecosystem boosted stocks in those areas. Anant Raj Ltd., which is heavily investing in data centers, surged 14.2 percent following announcements of a tax holiday for foreign firms providing cloud services from India-based data centers through 2047.
Additionally, stocks from local electronics component manufacturers like Amber Enterprises India Ltd., Dixon Technologies India Ltd., and Kaynes Technology India Ltd. also reflected gains. In the shipping sector, shares of the Shipping Corporation of India rose by 4.3 percent, while firms like Essar Shipping Ltd. and Dredging Corporation of India saw their stocks surge by more than 9 percent.
The proposed hike in STT is significant, increasing the tax on Futures from 0.02 percent to 0.05 percent and on Options from 0.1 percent to 0.15 percent. Futures and Options trading allow investors to leverage small capital for larger positions, yet they come with considerable risks. Analysts suggest that the increase in STT will raise transaction costs for traders, especially those who trade frequently or in high volumes. This move appears to be part of a strategy to mobilize additional revenue but is viewed by many traders as a potential deterrent to market volumes.
The impact may also extend to foreign portfolio investors (FPIs), especially those focused on high-frequency and derivative trading, who may reconsider their current strategies due to increased costs. Furthermore, the government announced that it would tax buyback proceeds for all shareholders as capital gains, adding another layer of complexity to investment strategies in the Indian market.
