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STT charges on Future and Options increased: Futures and options trading costs are set to rise after Finance Minister Nirmala Sitharaman announced a sharp hike in the Securities Transaction Tax (STT) on futures as well as options.

The STT on futures has been raised to 0.05 per cent from 0.02 per cent, a 2.5-times hike. The STT on options premiums will rise from 0.10 per cent to 0.15 per cent.

Futures and options are derivative contracts that enable traders to speculate on security prices without actually owning them. They are known as derivatives because they 'derive' their value from the actual prices of tradeable equity instruments like stocks or indices.

The higher levy will directly raise trading costs for active derivatives participants.

On a Rs 10 lakh monthly F&O turnover, STT cost rises

Earlier: Rs 200

Now: Rs 500

Extra cost: Rs 300 per month

For high-frequency traders, the impact will be far larger as costs compound with volume.

The tax hike is expected to hurt multiple stakeholders.

Active F&O traders: Higher transaction costs reduce profitability

Brokers: Volumes may fall as traders turn cautious

Exchanges: Derivatives activity on BSE and NSE could see moderation

The move signals the government’s intent to cool aggressive retail participation in derivatives. Policymakers have repeatedly flagged concerns around speculative trading and retail losses in the F&O segment.

By making derivatives trading more expensive, the government is attempting to discourage short-term gambling-like behaviour, without imposing direct restrictions.

If you trade futures frequently, your costs are now higher. Strategies that relied on thin margins may need recalibration. Long-term investors, however, remain largely unaffected by this change.

Indian equity benchmarks turned volatile after the Union Budget announcement, as finance minister Nirmala Sitharaman proposed a hike in the Securities Transaction Tax (STT) on derivatives.

The reaction was swift. The S&P BSE Sensex plunged more than 2,000 points, or nearly 3 per cent, during the session before trimming losses. The NSE Nifty 50 also slipped sharply and briefly fell below key levels.

At one point, the Sensex was down over 2,000 points. It later recovered part of the losses but still remained deep in the red. The Nifty 50, meanwhile, managed to hold the 25,000 mark after initial pressure.

At the time of writing this story:

BSE Sensex: 81,655.54, down 614.24 points, or 0.75 per cent

Nifty 50: 25,108.80, down 211.85 points, or 0.84 per cent

The Nifty had opened at 25,333.75, compared with its previous close of 25,320.65.

Banking stocks bore the brunt of the sell-off as risk appetite weakened following the derivatives tax hike.

Nifty Bank: 58,967.85, down 642.60 points, or 1.08 per cent

Key banking stocks were mostly lower:

- SBI fell 3.28 per cent

- Bank of Baroda dropped 3.76 per cent

- Union Bank declined 3.91 per cent

- Punjab National Bank slipped 2.26 per cent

- Axis Bank lost 1.60 per cent

- ICICI Bank eased 0.73 per cent

- Kotak Mahindra Bank fell 0.49 per cent

A few private lenders showed mild resilience, with IndusInd Bank and HDFC Bank trading marginally higher.

The proposed STT hike in the derivatives segment raised concerns over higher trading costs and lower volumes, especially in futures and options. Market participants fear the move could dent sentiment among active traders and reduce liquidity in the F&O segment.