Markets Plunge on Budget Day as Sensex Crashes 1,546 Points; STT Hike Spooks Investors

Markets plunge on Budget Day as Indian equities witnessed their worst Budget Day performance in six years on Sunday, February 1, following key announcements in the Union Budget 2026. The BSE Sensex crashed 1,546 points to close at 80,722, while the Nifty50 slipped sharply by 495 points to end at 24,825. The sharp sell-off was largely triggered by a steep increase in Securities Transaction Tax (STT) on futures and options trading.

STT Hike Triggers Sharp Market Reaction

One of the biggest shocks for traders came from the government’s decision to raise STT on derivatives:

 STT on futures increased from 0.02% to 0.05%

 STT on options premium raised from 0.10% to 0.15%

 STT on options exercise increased to 0.15%

Market experts believe this move immediately raised trading costs, hitting sentiment in the highly active F&O segment. Brokerage and exchange-related stocks fell as much as 10% during the session.

CA Arun Mantri said, “The budget is largely positive, but the STT hike in F&O is the only negative. Short-term reactions are expected due to higher trading costs.”

Sensex Stocks, Sectors Deep in the Red

The sell-off was broad-based. Out of the 30 Sensex stocks, 26 ended in the red, with only four managing gains.

 BEL, SBI, and NTPC declined up to 4%

 Public sector banks were the worst hit, falling nearly 4%

 All sectoral Nifty indices, including IT, FMCG, metals, pharma, media, realty, and financial services, closed lower

This widespread decline highlights how sensitive markets remain to policy changes impacting liquidity and trading activity.

Budget Highlights Fail to Calm Markets

Despite the market fall, the Union Budget 2026 included several long-term growth-focused announcements:

 Capital expenditure raised to ₹12.2 lakh crore for FY27

 Government aims to reduce debt to 50% of GDP by 2030-31

 Continued focus on infrastructure, urban development, and Tier-2 and Tier-3 cities

However, investors chose to focus on the immediate impact of higher taxes rather than long-term benefits.

Foreign Flows and Global Cues Add Pressure

Foreign Institutional Investors (FIIs) sold shares worth ₹601 crore, while Domestic Institutional Investors (DIIs) provided some support with purchases worth ₹2,251 crore. Mixed global cues from Asian and US markets also failed to lift sentiment.

What Should Investors Do Now?

Market experts advise investors to stay calm and focus on quality large-cap stocks. Budget-linked sectors like infrastructure, defence, and railways may offer long-term opportunities, while volatility could persist in the short term.

Markets plunge on Budget Day as higher STT in derivatives overshadowed otherwise growth-oriented budget announcements. While the short-term reaction has been harsh, experts believe long-term investors should look beyond the volatility and focus on fundamentals as policy clarity improves in the coming weeks.