India’s Budget STT Increase Rattles Equity Futures and Options Liquidity

The Union Budget 2026–27 has sparked sharp reactions from equity derivatives markets after Finance Minister Nirmala Sitharaman proposed a significant hike in the Securities Transaction Tax (STT) on futures and options. Under the new proposal, STT on equity futures is raised to 0.05% from 0.02%, while STT on options (premium and exercise) has increased to 0.15%, making derivatives trading materially more expensive for active market participants.

Market observers and high-frequency traders (HFTs) point out that even seemingly small tax increases can significantly erode profit margins for strategies that rely on tight spreads and ultra-fast execution, potentially reducing liquidity and turnover in the derivatives segment. Analysts say the STT hike also impacts arbitrageurs and algorithmic trading firms, which now face higher costs on every entry and exit, prompting many to reassess their models and risk thresholds.

The tax increase has already had market repercussions, with equities and brokerage stocks experiencing downward pressure as participants factor in higher transaction costs and potential slowdown in volatility-driven activity. While the government says the measure is intended to discourage excessive speculation and improve market stability, short-term traders and liquidity providers argue it could reduce depth in the F&O market and impact overall price discovery.#WhenWillBTCRebound #MarketCorrection #USPPIJump #PreciousMetalsTurbulence #USIranStandoff