Stock traders watch Finance Minister Nirmala Sitharaman present the budget as they trade at their terminals at an office in Mumbai on February 1, 2026.
| Photo Credit: Reuters
The benchmark Nifty 50 index declined 1.96%, closing at 24,825.45 points in the special session of Sunday (February 1, 2026), after Finance Minister Nirmala Sitharaman proposed an increase in the securities transaction tax (STT) on derivatives trade in the Union Budget.
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Ms. Sitharman proposed to raise the STT on futures to 0.05% from the present 0.02%. STT on options premium and exercise of options are both proposed to be raised to 0.15% from the present rate of 0.1% and 0.125%, respectively, she said in her speech at Parliament on February 1.
The tax hike, which is intended to reduce speculation, is also expected to reduce volumes in the derivatives market.
The NSE opened flat and stayed so for the better part of the Budget speech of nearly an hour-and-a-half, and dipped after the Finance Minister made the announcement on the increase in STT. Barring Nifty IT, which was up 0.57%, all 21 sectoral indices on the NSE were trading down, with the NIFTY PSU Bank index dropping by more than 5%. On the BSE, Sensex 30 fell a steep 1.88 to 80,723 points.
“The increase in STT on futures and options significantly raises transaction costs for derivatives traders, particularly impacting high frequency traders, arbitragers, and hedgers, thereby impacting their strategies,” Feroze Azeez, joint CEO, Anand Rathi Wealth Limited, said.
While stock brokers were unhappy with what they called a “surprise announcement”, many experts have also observed that this is a step in the right direction as the STT hike comes on the back of persistent retail participation in the derivatives market. In a white paper published in 2025, the Securities Exchange Board of India said nine out of 10 people lost up to ₹1 lakh crore in the derivative trades.
Published – February 01, 2026 10:07 am IST
