Shares of brokerage-linked and exchange-related companies fell sharply by up to nearly 12 per cent after Finance Minister Nirmala Sitharaman proposed an increase in the Securities Transaction Tax (STT) on derivatives in the Union Budget 2026-27, according to PTI.
In her Budget speech, Sitharaman announced that STT on futures contracts would be increased to 0.05 per cent from 0.02 per cent, a step aimed at curbing excessive speculation in the futures and options (F&O) segment.
Following the announcement, brokerage stocks witnessed heavy selling pressure. On the BSE, shares of Multi Commodity Exchange tanked 11.60 per cent to close at Rs 2,232.15 apiece, while Angel One plunged 8.61 per cent to settle at Rs 2,320. IIFL Capital Services declined 8.06 per cent to finish at Rs 303.80.
Shares of Billionbrains Garage Ventures, the parent company of Groww, fell 5.11 per cent to close at Rs 168. Anand Rathi Share and Stock Brokers declined 2.03 per cent to settle at Rs 567 on the bourse. On the NSE, shares of BSE Ltd ended 8.12 per cent lower at Rs 2,570 per share.
The broader equity market also came under pressure. The 30-share BSE Sensex plunged 1,546.84 points, or 1.88 per cent, to settle at 80,722.94, while the NSE Nifty dropped 495.20 points, or 1.96 per cent, to close at 24,825.45.
Addressing a post-Budget conference, Sitharaman said the government is not against derivatives trading but wants to discourage excessive speculation, particularly by small investors facing heavy losses.
"This nominal increase is purely aimed at speculation, only to deter them, to discourage them. We are not against it (F&O trade), but small investors are facing losses so how can we be quiet, so it (STT hike on F&O) is to deter such investments," Sitharaman said.
According to studies by Sebi, over 90 per cent of retail investors' trades in the F&O segment lead to losses. The capital markets regulator has also taken steps earlier to reduce volumes and has repeatedly cautioned retail investors against excessive exposure to derivatives trading, underscoring the need for responsible investing.
Market participants said the proposed STT increase is likely to raise transaction costs across the derivatives market, affecting both retail and institutional participants. Ashish Singhal, Co-founder of trading and investment platform Lemonn, said the taxation change could impact hedging as well as speculative activity.
"The proposed taxation on F&O is expected to raise transaction costs across the derivatives market, affecting individual investors as well as institutional participants such as AMCs, corporate hedgers, and portfolio managers who rely on these instruments for hedging and risk management," Singhal said, as quoted PTI.
He added that the current STT framework does not differentiate between types of users or the purpose of derivatives usage.
"This uniform treatment could discourage some investors from employing prudent hedging strategies, effectively increasing their exposure to market risk and making portfolio protection more expensive," he said.
Explaining the impact on transaction costs, Singhal said, "For every Rs 1 lakh worth of futures sold, traders now pay Rs 20 in STT instead of the previous Rs 12.50, and for a Rs 10,000 option contract sale, STT increased to Rs 10 from Rs 6.25".
He noted that while the policy intent is to curb excessive speculation, the absence of differentiation between risk-management-driven participation and speculative trading remains an important policy consideration.
Industry executives, however, indicated that diversified business models could help mitigate the impact of higher derivatives trading costs. Amit Majumdar, Group Chief Strategy Officer at Angel One Ltd, said the firm has strengthened its revenue mix beyond F&O trading.
"We have transformed Angel One into a diversified franchise spanning wealth, credit, asset management and soon insurance, adding steady, diversified revenue streams," Majumdar said.
"In Q3 FY26, F&O brokerage contributed about 44 per cent of our gross revenue, while interest income from client funding and our broader platform accounted for around 33 per cent, with the rest coming from cash and commodity broking, depository, distribution, and other income streams. This diversified mix reinforces the resilience of our model and gives us confidence that the broader trajectory of our business remains firmly intact," he added.
Market experts said the STT hike signals the government’s intent to rein in speculative excesses in the derivatives segment, even as debates continue over balancing investor protection with market liquidity and hedging efficiency.
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