Winning Bizness Desk
Mumbai.Indian equity markets witnessed their sharpest budget-day fall in six years on Sunday after the Union Budget 2026 announcements triggered heavy selling across sectors, led by public sector banks and derivatives-linked stocks. Higher Securities Transaction Tax on futures and options emerged as the key concern for traders, overshadowing positive macro signals in the budget.
Market crashes after budget presentation
Following the budget presentation on February 1, benchmark indices fell sharply. The BSE Sensex plunged 1,546 points to close at 80,722, while the Nifty slipped 495 points to end the session at 24,825. Market breadth remained weak throughout the day, reflecting broad-based selling pressure and cautious investor sentiment.
STT hike hits sentiment hard
One of the biggest triggers for the fall was the increase in Securities Transaction Tax. The government raised STT on futures from 0.02 percent to 0.05 percent. Tax on options premium was increased from 0.10 percent to 0.15 percent, while STT on options exercise and delivery was also raised to 0.15 percent.
The higher levy is expected to make derivatives trading costlier, directly impacting volumes and short-term trading profitability. Market participants reacted negatively, especially in a session marked by relatively low liquidity.
Banks and heavyweights lead losses
The public sector banking sector recorded the steepest fall of nearly 4 percent. Among the 30 Sensex stocks, 26 ended in the red, while only four managed to post gains. Shares of BEL, SBI and NTPC declined by up to 4 percent.
All sectoral indices on the Nifty closed lower, including metals, media, FMCG, IT, pharmaceuticals, financial services and realty, underlining the widespread nature of the sell-off.
Expert view on budget reaction
Market experts largely termed the fall as a short-term reaction. Chartered Accountant Arun Mantri said there was little to fault in the budget apart from the STT hike in futures and options. He added that the move may be structurally positive for equity culture in the long run, though it could trigger near-term volatility, especially given thin trading volumes.
Government finances and capex focus
Despite the market reaction, the budget outlined strong fiscal numbers. In 2025-26, the government’s total income stood at ₹34 lakh crore, of which ₹26.7 lakh crore came from taxes. Total expenditure was ₹49.6 lakh crore, including nearly ₹11 lakh crore in capital expenditure for infrastructure such as roads, highways and bridges.
For 2026-27, total income has been estimated at ₹36.5 lakh crore, with tax revenue projected at ₹28.7 lakh crore. Total expenditure is pegged at around ₹53.5 lakh crore, reflecting continued focus on growth and infrastructure creation.
Debt reduction target outlined
The government also reiterated its commitment to fiscal consolidation. It has set a target to reduce total government debt to 50 percent, plus or minus one percent, of GDP by 2030-31. Debt, which stood at 56.1 percent in 2025-26, is projected to decline to 55.6 percent in 2026-27.
Lower debt levels are expected to reduce interest costs over time, freeing up resources for spending on social and physical infrastructure such as schools, hospitals and roads.
Travel stocks cheer TCS cut
Amid the broader market weakness, travel-related stocks saw buying interest after the government reduced Tax Collected at Source on foreign tour packages. TCS has been cut to a flat 2 percent, replacing the earlier structure of 5 percent up to ₹7 lakh and 20 percent beyond that.
Following the announcement, shares of travel companies surged, with EaseMyTrip jumping nearly 11 percent to ₹7 during the session.
Real estate sees long-term positives
Industry leaders highlighted the budget’s long-term positives despite the market fall. Santosh Agarwal, CFO and Executive Director of Alpha Corp Development Limited, said the budget provides a clear blueprint for a new urban India.
He pointed to public capital expenditure being scaled up to ₹12.2 lakh crore and an annual ₹5,000 crore push for emerging urban hubs, which he said would strengthen Tier-2 and Tier-3 cities, improve liveability and reduce metro-centric growth over time.
