E-Paper
Why did stock market crash today? Sitharaman's big Budget move involved
Finance minister Nirmala Sitharaman's Budget 2026 proposed raising STT on Futures and Options trading, a move that crashed the stock market on Sunday.
Sensex and Nifty - Indian stock market indices - crashed on Sunday after finance minister Nirmala Sitharaman proposed in her Union Budget 2026 speech raising securities transaction tax on commodity Futures and Options (F&O) trading.
Sensex closed 1546.84 points lower, recovering slightly from the drop of 1700 points after the announcement of STT hike. NSE was down 495.20 points (-1.96 per cent) at 24,825.45.
Why did BSE Sensex, Nifty50 crash today?
The stock market crash on Sunday was led by shares of brokerage-related companies that nosedived 18 per cent after finance minister Nirmala Sitharaman proposed raising securities transaction tax on commodity Futures and Options. Track Feb 1 stock market updates here
On the BSE, shares of Multi Commodity Exchange (MCX) fell 18.08 per cent to ₹2,068.40, while Billionbrains Garage Ventures, the parent company of Groww, plunged 13 per cent to ₹154, and IIFL Capital Services declined 10.4 per cent to ₹296.10 apiece, according to data cited in a PTI news agency report.
Angel One's stock dropped 11.84 per cent to ₹2,237.95, and Anand Rathi Share And Stock Brokers depreciated 8.05 per cent to ₹532.15.
Some stocks gained
Meanwhile, a proposal offering tax holiday for foreign companies providing cloud services globally from India-based data centers through 2047 came s a boost for cloud infrastructure companies. Shares of Anant Raj Ltd., which is heavily investing in data centers, jumped as much as 14.2 per cent, a Bloomberg report said.
Budget-related announcements aiming for India to make biopharma manufacturing hub, plans to set up ‘mega textile parks and a ship-repair ecosystem and incentives for seaplanes led to gains in some other stocks also.
The above-mentioned announcements led to Raymond Ltd. and Trident Ltd. surging more than eight per cent during trading in Mumbai on Sunday, before giving up some of those gains, according to figures mentioned in the Bloomberg report.
Shares of local electronics component makers including Amber Enterprises India Ltd., Dixon Technologies India Ltd. and Kaynes Technology India Ltd. also gained.
Shipping stocks gained, with Shipping Corp. of India rising as much as 4.3 per cent. Others like Essar Shipping Ltd. and Dredging Corp. of India surged more than nine per cent.
What does STT hike in F&O trading mean
Finance minister Nirmala Sitharaman announced a hike in STT (Securities Transaction Tax) on Futures to 0.05 per cent from 0.02 per cent and STT on Options to 0.15 per cent from 0.1 per cent.
F&O trading refers to Futures & Options. A Future is a commitment to buy or sell an asset at a set price on a future date. An Option gives the trader the right, but not the obligation, to trade the asset at a specific price. These instruments allow for high leverage, meaning traders can control large positions with relatively small capital, but they carry significant risk.
STT is a government tax applied to market transactions, so this hike directly raises the cost for traders, especially those who trade frequently or in large volumes.
The finance minister's announcement makes futures trades slightly more expensive. An STT Options hike means the government has increased the Securities Transaction Tax charged on Options trades, which raises the cost of buying or selling options in the stock market.
According to analysts, the move is aimed to mobilise additional revenue but seen by traders as a potential dampener for market volumes.
"The increase in STT, especially in futures and options, is likely to act as a marginal negative for foreign portfolio investor (FPI) flows in the near term, particularly for high-frequency and derivative-focused global funds," PTI quoted Aakash Shah, Technical Research Analyst at Choice Equity Broking.
The government will also tax buyback proceeds for all types of shareholders as capital gains, FM Sitharaman announced.
