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Sensex, Nifty Plunge 2% on Budget Day as STT Hike Sparks Market Sell-Off

Indian equity markets suffered their steepest Budget-day decline in six years, with the Sensex and Nifty both closing nearly 2% lower. The sell-off was triggered by Finance Minister Nirmala Sitharaman's announcement of a sharp hike in the Securities Transaction Tax on futures and options trades. The panic selling was broad-based, dragging midcap and smallcap indices down over 2% and causing the volatility index, India VIX, to spike by 12%. While most sectors ended deep in the red, IT stocks provided minor relief as investors sought defensive positions.

Key Points: Budget 2026: STT Hike Triggers 2% Market Crash

  • Sharpest Budget-day fall in 6 years
  • STT on futures doubled to 0.05%
  • PSU Bank index crashes nearly 6%
  • India VIX volatility index surges 12%
2 min read

Sensex, Nifty sink nearly 2 pc as STT hike triggers sell-off

Sensex and Nifty post worst Budget-day fall in 6 years after Finance Minister raises Securities Transaction Tax on futures & options.

"The market's reaction has been negative... due to the increased STT for futures, triggering a knee-jerk response - Expert"

Mumbai, Feb 1

Indian stock markets witnessed a sharp fall on Budget Day as investors reacted negatively to the government's decision to raise the Securities Transaction Tax on futures and options trading.

The benchmark indices Sensex and Nifty recorded their biggest Budget-day decline in six years, with both ending around 2 per cent lower in a special trading session held on February 1.

By the end of the session, the Sensex closed at 80,723, while the Nifty settled at 24,825, losing 495 points or nearly 2 per cent.

Markets were far weaker during the day, with the Sensex plunging almost 3,000 points at one stage to hit an intra-day low of 79,899.42.

The Nifty also slipped sharply to a low of 24,572 before recovering slightly.

"The market's reaction has been negative, primarily due to low expectations, limited outlays and the negative bias created by the increased Securities Transaction Tax (STT) for futures, triggering a knee-jerk response," an expert stated.

The sell-off came after Finance Minister Nirmala Sitharaman announced higher STT rates during her Budget 2026 speech.

The tax on futures trades was increased to 0.05 per cent from 0.02 per cent, while STT on options premium was raised to 0.15 per cent from 0.1 per cent.

These steep hikes triggered heavy selling, especially in stocks linked to trading and financial activity.

The broader market also remained under strong pressure. The Nifty Midcap 100 index fell 2 per cent, while the Nifty Smallcap 100 dropped 2.7 per cent, showing that selling was not limited to large-cap stocks.

Investor fear rose sharply as India VIX, which measures market volatility, jumped nearly 12 per cent, reflecting high nervousness.

Sector-wise, almost all indices ended in the red except the IT sector. Public sector bank stocks were hit the hardest, with the Nifty PSU Bank index tumbling nearly 6 per cent.

Metal stocks also suffered heavily, falling about 4 per cent. Banking and financial services stocks declined by over 2 per cent each.

Among the Nifty companies, Bharat Electronics, Hindalco and ONGC were the worst performers, each falling around 6 per cent.

Other major stocks such as SBI, Coal India, Jio Financial Services, Nestle India, ITC and Tata Consumer Products also closed lower.

On the positive side, IT stocks provided some relief, with Wipro, TCS and Max Healthcare gaining around 2 per cent each.

- IANS

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Reader Comments

P
Priya S
While the sell-off is painful, maybe the government has a point? F&O trading has become a casino for many. This tax hike might discourage excessive speculation and protect small investors from losing their shirts. A bitter pill for long-term health.
A
Aman W
Bhai, 3000 point drop in Sensex! My broker's app crashed from the volume. PSU banks down 6%? That's brutal. Looks like the market wanted big reforms, not more taxes on trading. Time to average down or wait and watch?
S
Sarah B
As an NRI investor, this is concerning. The STT was already a unique, complex feature of Indian markets. Doubling it on futures seems like a revenue grab that could hurt liquidity and India's appeal vs. other emerging markets.
V
Vikram M
The knee-jerk reaction is overdone. Market falls on Budget day are common. Fundamentals of the economy are strong. IT stocks held up, showing where the real value is. This is a buying opportunity in quality names. #InvestDontTrade
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Kavya N
My father, a retired banker, called me worried about his SBI shares. It's days like these that remind us equity is for the long term. But the government should communicate the rationale behind such a steep hike better to calm nerves.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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