Budget shocker: Sensex tanks 1,500 points, STT hike hits derivatives
On Sunday's Budget day, the Indian stock market saw its steepest fall in years—Sensex sank over 1,500 points (almost 2%) and Nifty dropped nearly 2%.
The main trigger? The government surprised some market participants by hiking the Securities Transaction Tax (STT) on derivatives trading.
Foreign investors pull out $22.9 billion recently
This wasn't just a blip. Key sectors like PSU banks and metal stocks took big hits—PSU banks fell between 4% and 6%, with State Bank of India down nearly 5%.
Foreign investors pulled out around $22.9 billion recently as the rupee slipped, wiping out a massive ₹10 lakh crore from listed companies' value.
With higher STT making trading costlier, even brokerages like BSE and Angel One saw their shares tumble more than 13%.
Analysts say rise in STT could dampen derivatives activity
Analysts say the rise in STT — on futures (from 0.02% to 0.05%) and on options (to 0.15%) — raises transaction and impact costs and could dampen derivatives activity.
Kotak Securities's CEO Shripal Shah said it could raise impact costs for traders, hedgers and arbitrageurs.
Despite Sunday's chaos, early signs point to a flat start for markets on Monday—but many are watching closely to see what happens next.