The markets crashed after the Finance Minister announced key changes to the STT rate. The Sensex and the Nifty plunged to their lowest levels in 2026. The Sensex plunged 1,200 points. To discourage further participation in F&O markets, the Union Finance Minister Nirmala Sitharaman proposed to raise STT on Futures to 0.05% form 0.02% and STT on Options raised to 0.15%.
“STT hike on futures contracts from 0.02% to 0.05% is a negative surprise for the markets, and the same is visible in the prices. We were not expecting this kind of move at a time when FIIs are continuously selling for months,” said Vipin Kumar, Assistant Vice President of Globe Capital.
“A 150% hike in STT on Futures and a 50% hike in STT on Options is a surprise. Already, F&O volumes are down in FY2026, and as against the target of Rs 75000 crores, collections are at Rs 48,000 crores as of mid January. Markets have not liked this increase in tax. This was an opportunity to reduce STT, and the increase is a big surprise,” said market veteran Ajay Bagga.
“This is a meaningful jump, not a marginal tweak, and it is likely to have a direct dampening effect on F&O volumes, particularly among high-frequency traders, proprietary desks, and cost-sensitive strategies,” said Aakash Shah, Research Analyst at Choice Broking.
Also, all the brokerage and exchange stocks plunged after the announcement. The
Multi Commodity Exchange of India crashed over 17%, Angle One dropped 12.22%, Nuvama Wealth Management declined over 9%, Indian Energy Exchange fell 3.3%, and many other capital market stocks bled deep in the red.
The stock price of BSE plunged more than 11% to a low of Rs 2,485.50 after the announcement.
Govt to tax buyback as capital gains
Apart from that, the government will tax buybacks as capital gains for all kinds of shareholders from FY27. The Finance Minister stated that the current change in the taxation of buybacks was initiated to address “improper use of the buyback route by promoters.” To protect other investors, she said, “in the interest of minority shareholders, I propose to tax buyback for all types of shareholders as Capital Gains.”
India’s F&O market largest in terms of volume
India’s Futures & Options (F&O) market is the world’s largest by volume, with the National Stock Exchange (NSE) recording a monthly turnover of Rs 8,740 lakh crore, which is around $1.1 trillion in March 2024. The combined daily turnover reached Rs 381 lakh crore by July 2025, driven heavily by retail investors who account for roughly 41% of index options.
India’s 91% of retail investors were losing money in the F&O segment in FY25, with average losses of over Rs 1 lakh.
In November 2024, SEBI increased the minimum contract value for index derivatives to Rs 15 lakh–Rs 20 lakh to curb retail speculative trading and enhance market stability. This raised lot sizes and limits weekly expiries to one per exchange.