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The Indian stock market fell after Finance Minister Nirmala Sitharaman presented the Union Budget 2026, her ninth consecutive Budget.

The BSE Sensex dropped approximately 2300 points while Nifty fell 748 points. Experts said the market reaction was mainly due to the sharp increase in Securities Transaction Tax (STT) on futures and options, along with limited measures to boost consumption.

The Budget set the fiscal deficit for 2026-27 at 4.3 per cent and allocated Rs 12,200 crore for capital expenditure. Capital gains tax on buybacks was revised for individual investors, with long-term gains taxed at 12.5 per cent and short-term gains at 20 per cent.

Experts said this move is positive for minority shareholders. Other key announcements include a tax holiday for cloud services companies until 2027, higher investment limits for individual and aggregate Foreign Portfolio Investors (FPIs), and support for manufacturing in seven strategic sectors.

Anil Singhvi said, "The Budget was not very exciting because expectations were already low. However, buybacks for minority shareholders are positive as it will benefit individual investors and reduce idle cash in companies."

He noted that while the Budget was completed quickly, it addressed some corporate concerns but lacked measures to boost overall market sentiment.

Market veteran Feroze Azeez said, "The sharp increase in STT on futures and options is a concern. Futures STT has been raised from 0.02 per cent to 0.05 per cent, and options STT has increased from 1 per cent to 1.5 per cent. This 150 per cent increase will reduce trading volumes and affect market efficiency. The market reacts negatively because higher transaction costs limit price discovery and make trading less attractive."

He added that inefficiencies in arbitrage trading will increase, and large investors may avoid taking positions due to higher costs.

Vijay Mantri said, "Triple taxation on mutual fund investors is an issue. Long-term investors already pay capital gains tax, and now the increase in STT adds to the burden. Ideally, long-term investments should have been exempt or given relief to encourage market participation."

He noted that the Budget did little to reduce taxation elsewhere, and investors were expecting more relief measures to stimulate consumption and investment.

Arun Giri highlighted procedural reforms, saying, "The Budget has made several steps towards automation and reducing manual intervention. For example, TDS certificates will now be handled through technology, reducing the need for individual submissions. This will improve efficiency in compliance and reduce errors."

He added that these steps are positive for companies and individual taxpayers, even though broader market sentiment was affected by higher STT.

Experts said the market reaction was broad-based. Mid-cap and small-cap indices fell more sharply, with declines of over 2-3 per cent, reflecting weakness across sectors.

While the Budget rationalised some aspects like dividend taxation and buybacks for minority shareholders, it did not offer major incentives for consumption or measures to reduce other capital market taxes.