Indian stock indices fell on Sunday following the government’s latest budget proposal, which included increases to the securities transaction tax (STT) and omitted new incentives aimed at attracting foreign capital. The index remained open on Sunday, which was a rare, special live trading session held specifically to allow investors to react to the Union Budget 2026, presented by the Finance Minister on that day.
In its annual budget announcement, the Indian government proposed to raise the STT on equity futures from 0.02% to 0.05%. The tax on options premiums was introduced to move up to 0.15% from 0.1%, while the STT on exercising options increased to 0.15% from 0.125%.
An expert noted that although the budget proposal increased allocations for defence and targeted manufacturing growth, it did not introduce measures that investors were hoping would boost immediate market enthusiasm.
Since the start of 2025, overseas investors have pulled $23 billion from Indian equities, reflecting ongoing concerns about market friction and policy signals.
Industry leaders pointed out that raising transaction taxes at a time when liquidity and foreign participation are crucial could reduce the competitiveness of India’s capital markets.
The securities transaction tax, first introduced in 2004, is imposed by the central government on trades conducted through national stock exchanges. Its goal was to streamline tax collection and reduce tax evasion related to capital gains.
The current increase has been justified by officials as a move to discourage speculative trading, particularly amid figures showing that over 90% of retail investors involved in futures and options incur losses.
