Stock market crash after Budget 2026 speech: Finance Minister Nirmala Sitharaman's Union Budget speech has spooked stock markets, with both Nifty50 and BSE Sensex, crashing over 2% in the special trading session being held.
Nifty50 ended the special trading session at 24,825.45, down 593 points or 2.33%. BSE Sensex ended at 80,722.94, down 1,843 points or 2.23%.Investors reacted negatively to a hike in Securities Transaction Tax (STT) on futures and options (F&O) trades announced by FM Sitharaman. Narendra Solanki, Head Fundamental Research - Investment Services,Anand Rathi Share and Stock Brokers Limited is of the view that stock markets are seeing a knee-jerk reaction.
“Markets witnessed a knee-jerk reaction following the unexpected hike in STT on Futures and Options, as hopes of a reduction in capital gains tax had already been priced in,” he said.
“I propose to raise the STT on Futures to 0.05 percent from present 0.02 percent. STT on options premium and exercise of options are both proposed to be raised to 0.15 percent from the present rate of 0.1 percent and 0.125 percent respectively,” she announced.
Why did stock market crashing after Budget 2026? Top reasons
The announcement on STT sparked aggressive selling, particularly in stocks associated with trading, broking, and market activity, as stock market participants reassessed the increased cost of operating in the derivatives segment.What is STT? It is a government-imposed levy on every buy and sell transaction in the equity market, futures and options. Though the tax may seem small in percentage terms, it directly adds to transaction expenses, especially affecting active traders, hedgers, and arbitrage participants.
It is important to note that the hike in STT announced in Budget is only for futures and options.Brokerage and exchange-related stocks led the market decline. Shares of BSE Ltd, Groww parent Billionbrains Garage Ventures, and Angel One tumbled by as much as 13.5%. BSE Ltd slipped to an intraday low of Rs 2,517.30, while Angel One fell to Rs 2,284.70.Selling pressure was not limited to brokerage counters. Heavyweight stocks also weighed on the benchmarks, with Reliance Industries declining around 2.5% and State Bank of India sliding nearly 5%, deepening losses on the headline indices.The downturn was widespread across the broader market, as risk aversion dominated trading. Small-cap stocks dropped about 3%, while the midcap index fell roughly 2%, highlighting a broad-based retreat by investors.Market participants noted that the announcement came at a time when equities were already grappling with volatility and selling pressure. The abrupt increase in transaction costs intensified concerns, triggering a widespread sell-off across sectors.Commenting on the development, Shripal Shah, Managing Director and CEO of Kotak Securities, said the steep increase in STT could dampen derivatives activity. He noted that the sharp hike in futures and options taxes, following last year’s increase, is likely to raise impact costs for traders, hedgers, and arbitrageurs, potentially cooling trading activity and reducing volumes.Shah added that the government’s objective appears to be curbing excessive trading rather than maximising revenue.
Any additional revenue from higher STT, he said, could be offset by lower derivatives volumes as higher costs discourage participation.With markets already under strain, the latest Budget proposal is being viewed as an added near-term downside risk for equities.
What’s the outlook for stock market? What should investors do?
"The Budget is clearly supportive of infrastructure, manufacturing, and digital-led themes. However, the absence of capital gains tax relief and the increase in STT create near-term headwinds for the broader market.
Investors should remain selective, focus on quality sectors with strong policy visibility, and avoid aggressive short-term bets.Defensive allocation and long-term positioning remain key in navigating post-Budget volatility. Markets were expecting relief on LTCG and STCG taxation, but no proposals were announced, which may result in continued FII selling. Adding to the pressure, the hike in STT on futures and options acts as a broad-based negative for market sentiment. Positive sectors to watch Railways, Electronics, Semiconductors, Pharma, Metals & Mining, and Data Centers.
Strategy is to stay diversified, focus on structural growth sectors, and maintain a cautious approach in the near term,” says Somil Mehta, Head of Retail research at Mirae Asset Sharekhan.
