Mumbai, 1 February 2026: Indian equity markets faced a sharp correction on Monday, with the Sensex and Nifty falling nearly 2% after Finance Minister Nirmala Sitharaman announced an increase in Securities Transaction Tax (STT) in her Union Budget 2026 speech.
The government raised the STT on futures trades to 0.05% from 0.02% and the STT on options premiums to 0.15% from 0.1%, triggering a wave of profit-booking among investors in equity derivatives.
The move prompted significant selling pressure in the derivatives segment, dragging benchmark indices down. Analysts noted that while the hike is aimed at increasing government revenue, it directly impacts trading costs for investors and traders, particularly in the derivatives market.
Market Reaction
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Sensex: Fell close to 2%, wiping out gains from the early session.
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Nifty 50: Declined nearly 2%, with heavy losses in banking, IT, and FMCG stocks.
Market experts suggested that the STT increase could slow speculative trading in the short term, but fundamentals in the broader equity market remain intact. “While higher transaction costs may dampen intraday trading volumes, the move is unlikely to affect long-term investment flows,” said a senior market analyst.
Investor Outlook
Investors are advised to reassess positions in futures and options while keeping an eye on broader market trends. With earnings season around the corner, domestic fundamentals and global cues are expected to play a larger role in market direction in the coming weeks.