The sell-off followed the Budget proposal to hike STT on derivatives, with options STT increased to 0.05% from 0.02% and futures STT raised to 0.15% from 0.1%.
The move is expected to raise transaction costs for traders and could impact volumes across exchanges and brokerage platforms.
“The steep increase in STT on futures and options, coming on top of last year’s hike, is likely to raise impact costs for traders, hedgers, and arbitrageurs. This could cool derivative activity and lead to a reduction in volumes. The intent appears to be volume moderation rather than revenue maximisation, as any potential revenue gain could be offset by lower derivative volumes,” said Shripal Shah, MD and CEO, Kotak Securities.”In capital markets, higher STT on futures and options appears to be a deliberate attempt to curb excessive retail speculation and improve market quality. The trade-off could be lower volumes and near-term pressure on the markets,” said Ritvik Dashora, CFA, CEO of Tradomate.
Equity Research Analyst Prasenjit Paul said that these measures raise transaction costs and change the near-term economics for both traders and companies relying on buybacks as a capital-return tool.
Adding to the negative sentiment, the Centre announced that share buybacks will now be taxed as capital gains for all categories of shareholders.
This marks a shift from the earlier regime, where buyback proceeds were treated like dividends in the hands of shareholders and taxed according to individual slabs, with companies deducting 10% TDS before payout.
The Finance Minister made this announcement on the floor of the Lok Sabha during her Budget 2026 speech, her ninth consecutive Budget.
First Published: Feb 1, 2026 12:27 PM IS
