On Budget Day 2026, the Indian stock market experienced a significant downturn, triggering concerns among investors and analysts. While the Finance Minister Nirmala Sitharaman presented the Union Budget 2026, the benchmark indices, Sensex and Nifty, initially showed firmness but sharply reversed course, ultimately plummeting nearly 3%.
The Nifty 50 index hit an intraday low of 24,571.75, while the Sensex tumbled to 79,899.42. By the end of the day, the NSE Nifty 50 index closed 495.20 points lower, a 1.96% decrease, settling at 24,825.45. Similarly, the BSE Sensex settled 1,546.84 points down, reflecting a drop of 1.88%, to close at 80,722.94. This Budget Day crash eroded a substantial amount of investor wealth, estimated to be around ₹9–10 lakh crore.
The primary trigger for this market reaction was the announcement of an increase in the Securities Transaction Tax (STT) on derivatives trading. The STT on futures was increased from 0.02% to 0.05%, a 2.5x increase, and on options (premium), it rose from 0.10% to 0.15%, marking a 50% hike. This adjustment immediately impacted traders, proprietary desks, and brokerages that heavily rely on high volumes and tight spreads in the derivatives segment, which constitutes a significant portion of daily turnover on the National Stock Exchange (NSE). Feroze Azeez, Joint CEO of Anand Rathi Wealth Limited, noted that the STT increase would raise transaction costs for derivatives traders, especially impacting high-frequency traders and hedgers.
The market's negative sentiment was further compounded by the government's decision to tax share buyback proceeds as capital gains for all categories of shareholders. According to Apurva Agarwal, Founder of Universal Legal, the Union Budget 2026 reflected a shift towards structural reform, which led to the market's sharp, short-term reaction, particularly concerning the STT increase on derivatives.
In response to the market's reaction, the Prime Minister's Economic Advisor downplayed the crash, commenting that "markets go up and down". This perspective suggests a longer-term view, emphasizing that market fluctuations are a normal part of economic activity.
Despite the day's losses, some market analysts believe that the Union Budget 2026-27 is positive for long-term economic growth, particularly with its focus on fiscal discipline and structural reforms. Anita Gandhi, Institution Head at Arihant Capital Markets, acknowledged the disappointment compared to market expectations but stated that the budget reinforced the government's commitment to sustainable growth. Dhiraj Relli, MD & CEO of HDFC Securities, described the market's correction as a knee-jerk reaction primarily stemming from the revised STT framework.
Union Minister of Commerce and Industry Piyush Goyal dismissed concerns over the stock market trends, asserting that the budget would be beneficial for India's exports. Finance Minister Nirmala Sitharaman attributed the rupee's volatility to global uncertainties rather than domestic weaknesses, highlighting the government's efforts to maintain strong economic fundamentals.
While the immediate market reaction was negative, with most sectors ending in the red, the IT sector remained positive, supported by gains in stocks like TCS, Infosys, and Wipro. Market watchers anticipate potential bottom fishing at lower levels, though some expect the market to remain negative in the short term.