The Indian stock market witnessed a volatile Sunday session as Finance Minister Nirmala Sitharaman presented the Union Budget 2026. While the broader fiscal math earned praise from experts like Nilesh Shah, a “surprise” hike in the Securities Transaction Tax (STT) on derivatives triggered a massive sell-off, erasing billions in market capitalization.
The Sensex plummeted over 2,000 points intraday before recovering slightly to close 1.88% lower at 80,722. The Nifty followed suit, shedding 495 points to end at 24,825.
Shah decoded the STT Shock
According to Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company, the market’s sour mood was almost entirely driven by the unexpected STT hike. The Finance Minister proposed raising the levy on futures to 0.05% (from 0.02%) and on options premium to 0.15%. In some segments, this translated to a steep 150% increase.
Shah noted that the selling pressure came primarily from the speculator side rather than long-term investors. “The reaction is largely independent of what the budget actually is,” Shah explained.
He pointed out that the crash was compounded by margin square-offs following a slump in commodity markets the previous day, forcing traders to liquidate positions to pay off dues.
Despite the immediate panic on Dalal Street, Nilesh Shah highlighted several structural positives within the Budget.
Shah on positives of the Budget
For Shah, a key highlight for the economy is the capital expenditure (capex) target of Rs 12.10 lakh crore, which comfortably outpaces the net market borrowing of Rs 11.70 lakh crore.
“This implies that capital expenditure is more than the total borrowing, which is always a healthy sign for a growing economy,” Shah remarked. The Budget also signaled a strategic shift toward the services sector, aiming to capture 10% of global services.
Alongside infrastructure and manufacturing (via the PLI scheme), the government is now pivoting toward high-growth areas like Data Centres and Artificial Intelligence (AI). For Shah, these are steps in the right direction, with the focus now shifting entirely to execution.
Broking stocks slide on STT shock
Stocks of exchanges, brokers and market infrastructure firms bore the brunt of the selloff, having already been under pressure from earlier regulatory curbs by the Securities and Exchange Board of India.