Kolkata: Finance minister Nirmala Sitharaman, while presenting Budget 2026 announced the decision to increase Securities Transaction Tax on commodity futures from 0.02% to 0.05% — a move which did not go well with the stock market which nosedived. Another decision mentioned during the speech is to treat proceeds of share buyback for all categories of shareholders as capital gains.

At one point of time, Sensex 30 dived as much as 2,370.36 points, or 2.88%, and went below 80,000. However around 2:15 pm, the index recovered some ground and was down 1.46% (or 1,208 points). Among the big laggards were Bharat Electronics, SBI, HCL Tech, Tata Steel, Asian Paints and Eternal. Among the gainers were Sun Pharma, Sun Pharma, Kotak Mahindra Bank and TCS.

Target: discourage excessive speculation

Some analysts pointed out that the STT revision was targeted at high-volume derivative trading. The govt wanted to raise transaction costs for active and short-term trading strategies. However, some also mentioned possible adverse reaction among the foreign investors. “STT on options premium and exercise of options are both proposed to be raised to 0.15 per cent from the present rate of 0.1 per cent and 0.125 per cent respectively,” said the FM. The move, to be sure, will earn more revenue for the govt.

Will FPIs be negatively impacted

The equity market has been volatile for some time now, mainly due to the FPI outflow. Analysts pointed out that the announcement on STT could add to the negative mood. “The increase in Securities Transaction Tax (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,” Aakash Shah, technical research analyst at Choice Equity Broking, was quoted in the media as saying.

Stocks of brokerage-related firms suffered a lot i the special trading session on Sunday due to the STT announcement. On BSE, MCX (Multi Commodity Exchange) shares dropped as much as 18.08% to touch Rs 2,068.40. The stock of Billionbrains Garage Ventures — holding company of platform Groww — fell 13% to touch Rs 154. The third biggest fall was in the IIFL Capital Services stock which declined 10.4% to Rs 296.10. Other stocks to suffer were Angel One (11.84%) and Anand Rathi Share And Stock Brokers (8.05%). The BSE shares too fell 15%.

FPIs have been pulling out investments from Indian equities due to a variety of factors. In Jan 2026 they have reportedly pulled out more than Rs 41,000 crore. Higher STT will trim the post-tax profits of these entities and in the short term will further dampen their moods vis-a-vis India. But in the long-term FPIs are likely to be boosted by fundamentals and corporate earnings, policy predictability and stability of the currency.

MAT reduced

The FM said during the Budget speech that MAT or Minimum Alternate Tax will be the final tax and the rate will decline from 15% now to 14%. She also announced that the government will set up a joint panel of Corporate Affairs Ministry and CBDT for incorporation of income computation and disclosure standards.