Budget 2026-27: ₹9.4 trillion erased as markets recoil on STT surprise

A sharp hike in derivatives transaction tax and lack of market-friendly measures in Budget 2026 rattled sentiment, dragging Sensex and Nifty to their steepest Budget-day fall in six years

A  sharp hike in the securities transaction tax (STT) on deri­vatives, combined with the absence of market-supportive measures in the Union Budget, rattled investors on Sunday, sending domestic equities into their steepest Budget-day decline in six years. 

The Sensex tumbled as much as 2,370 points intraday before closing at 80,723, down 1,547 points, or 1.8 per cent. The Nifty fell nearly 3 per cent during the session, ending at 24,826, down 495 points. This marked the biggest Budget-day fall for both indices since February 2020. Total market capitalisation of BSE-listed companies eroded by ₹9.4 trillion to ₹451 trillion. 

The government proposed raising STT on futures to 0.05 per cent from 0.02 per cent, on options premiums to 0.15 per cent from 0.1 per cent, and on the exercise of options to 0.15 per cent from 0.125 per cent. The hike, along with no relief on long-term capital gai­ns or measures to attract fore­ign portfolio investors (FPIs), caught markets off guard. 

 

“There were expectations that STT would be done away with, or at least some easing on long-term capital gains,” said U R Bhat, cofounder of Alphaniti Fintech. Saurabh Mukherjea, chief investment officer of Marcellus Investment Managers, called it a necessary corrective, saying speculative derivatives trading had destroyed household capital, and the step could redirect savings towards consumption and productive investment. 

Indian equities have lagged most emerging-market peers this year. The Sensex is down 5.3 per cent and the Nifty 5 per cent in 2026 so far. FPIs have been net sellers, offloading ₹1.7 trillion in 2025 and ₹35,962 crore this year, including ₹588 crore on Sunday. 

Domestic institutions pulled out ₹683 crore. Stocks linked to market activity fell sharply: BSE down 8.1 per cent, Billionbrains Garage Ventures (Gro­ww parent) 5.1 per cent, and Angel One 8.6 per cent. Banking stocks, particularly public sector lenders, also slipped on concerns that higher gross borrowings could lift bond yields. 

State Bank of India fell 5.3 per cent, HDFC Bank 1.2 per cent, and ICICI Bank 1.5 per cent. The Nifty PSU Bank index dropped 5.6 per cent, and the Nifty Bank 2 per cent. 

Information technology and pharmaceutical stocks rose on proposals taxing share buybacks and a ₹10,000 crore outlay for domestic biologics and biosimilars. Market breadth was negative, with 2,444 stocks declining and 1,699 advancing.