Why Union Budget 2026 Caused Stock Market Crash?

Indian equity benchmarks Sensex and Nifty50 witnessed a sharp sell-off on Sunday after Finance Minister Nirmala Sitharaman announced an increase in the Securities Transaction Tax (STT) on commodity futures and options (F&O) trading in the Union Budget 2026 speech.

The BSE Sensex ended the session down by 1,546.84 points, recovering marginally from an intraday fall of nearly 1,700 points following the budget announcement. The NSE Nifty50 closed 495.20 points lower, or 1.96 per cent down, at 24,825.45.

Why Markets Fell

The market downturn was primarily driven by steep losses in brokerage and trading-related stocks after the proposed STT hike on F&O transactions. Shares of Multi Commodity Exchange (MCX) plunged 18.08 per cent to Rs 2,068.40 on the BSE. Billionbrains Garage Ventures, the parent company of Groww, declined 13 per cent to Rs 154, while IIFL Capital Services fell 10.4 per cent to Rs 296.10, according to PTI data.

Other brokerage stocks also came under pressure. Angel One dropped 11.84 per cent to Rs 2,237.95, while Anand Rathi Share and Stock Brokers slid 8.05 per cent to Rs 532.15.

Stocks That Gained

Despite the broader market weakness, select stocks advanced on the back of favourable budget proposals. A tax holiday for foreign companies offering global cloud services from India-based data centres until 2047 boosted cloud infrastructure plays. Anant Raj Ltd., which has significant exposure to data centre investments, surged up to 14.2 per cent, according to a Bloomberg report.

Additional budget measures aimed at positioning India as a biopharma manufacturing hub, developing mega textile parks, creating a ship-repair ecosystem and providing incentives for seaplanes supported gains in several stocks. Raymond Ltd. and Trident Ltd. rose over eight per cent during intraday trade before paring some gains.

Electronics component manufacturers such as Amber Enterprises India Ltd., Dixon Technologies India Ltd. and Kaynes Technology India Ltd. also traded higher. Shipping stocks outperformed, with Shipping Corporation of India rising as much as 4.3 per cent, while Essar Shipping Ltd. and Dredging Corporation of India gained over nine per cent.

What STT Hike Means

In her budget speech, Sitharaman announced an increase in STT on futures to 0.05 per cent from 0.02 per cent, and on options to 0.15 per cent from 0.1 per cent.

Futures and options are derivative instruments that allow investors to take leveraged positions by committing to buy or sell assets at predetermined prices. While they offer opportunities for amplified gains, they also involve higher risk. STT is a tax levied by the government on market transactions, and the revised rates will directly raise trading costs, particularly for high-frequency and large-volume participants.

Market experts noted that while the move is intended to generate additional revenue, it could weigh on trading activity. Aakash Shah, Technical Research Analyst at Choice Equity Broking, told PTI that the higher STT in the derivatives segment may act as a short-term negative for foreign portfolio investor flows, especially for funds focused on high-frequency and derivatives trading.

In another key announcement, the finance minister said buyback proceeds will now be taxed as capital gains for all categories of shareholders, adding to investor concerns during the session.

Also Read: Union Budget 2026: Check Which Items Became Cheaper and Which Got Costlier