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Informist, Sunday, Feb. 1, 2026

 

By Gopika Balasubramanium

 

MUMBAI – The equity market let its dissatisfaction known about the proposed hike in the securities transaction tax, amply evident from the near 3% intraday fall in the Nifty 50, as well as call writing in the options chain. The Nifty 50 saw the sharpest fall on a Budget Day since 2020 and the steepest single-day fall in nine months. Discontent over the securities transaction tax measure was evident as February futures contracts fell, and so did the March and April contracts. Some analysts expect foreign investors to sell Indian stocks in the coming sessions, post the proposed STT hike. Equity markets were open Sunday on account of the Union Budget for 2026-27 (Apr-Mar) presented by Finance Minister Nirmala Sitharaman. 

 

The finance minister proposed raising the securities transaction tax on futures contract transactions to 0.05% from 0.02% and that on options premium and exercise of options to 0.15?ch from 0.1% and 0.125%, respectively. This is seen hurting volumes and liquidity in the capital market, analysts said.

 

The government has raised the Securities Transaction Tax on futures and options to discourage speculative trading, Finance Minister Nirmala Sitharaman told reporters in a press conference after presentation of the Union Budget for FY27.

 

This is the third consecutive time the government has acted upon the STT, in order to regulate volume and prevent unsophisticated retail investors from losses. However, this move is seen as discouraging foreign investors, who have been selling Indian stocks for several months now. 

Trading in the futures and options segment will get "more difficult" and people trading arbitrage, scalping, and intraday would be impacted the most, a trader said. Due to continuous tampering of rules and adding "more and more" taxes, market depth has become poor and will be negatively impacted again, he said. 

Foreign institutional investors, who have been selling for four years, will have yet another reason to exit the Indian market, amid higher taxes and "poor" hedging options for them, coupled with a weakening rupee, the trader said. He also added that foreign investors are not tied to the Indian stock market and would seek out equities which offer better investment opportunities and good policies. "Currently in India, we see a new circular and rules coming every second week," he added. 

 

The benchmark Nifty 50 closed 2% lower, or 495.20 points, at 24825.45 points. Earlier in the day, the index fell to a five-month low of 25440.90 points, 3.5% lower from the day's high and 3% lower from Friday's close. The index was volatile throughout the session as forecasted by analysts. In the short-term, the 50-stock index is expected to seek support at 24900 points and face resistance at 24400 points. Some analysts expect a much sharper fall in the index to up to 24300 points. These support levels indicate a downside of 1.7-2.1% from Sunday's closing level. 

 

Traders wrote call options expiring next week across the board, which confirms the negative sentiment in the market for near-term. Premiums at out-of-the-money 25300-25500 call saw a 90% dive in premiums, indicative of traders being short at those levels. The highest concentration and addition of open interest was at 25500. On the put side, traders bought 24100 contract, indicating that there are expectations of a steeper fall. This was also the strike that saw the highest addition. The maximum concentration of open interest was at 24500 put. The Nifty 50 February futures contract closed at 24791.80, down 624.60 points or 2.5%.   

 

"Call writing was seen at multiple strikes along with put unwinding," Vipin Kumaar, assistant vice president – technical and derivatives at Globe Capital Market. The put–call ratio for the current week's expiry stands at 0.41, indicating negative but oversold options positioning, he added.

"(Proposed) STT (hike) will have a short-term impact, I don't see aggressive selling by FIIs (foreign investors) and will be more dependent on currency fluctuations and geopolitical developments," Kumaar said. Derivatives volumes are likely to take a hit, he added.

 

--Nifty 50 February closed at 24791.80, down 624.60 points; 33.65-point discount to the spot index

--Nifty 50 March closed at 24,970.00, down 612.80 points; 144.55-point premium to the spot index

--Nifty 50 April closed at 25124.00, down 625 points; 298.55-point premium to the spot index

 

Multi Commodity Exchange of India, Bharat Electronics, BSE, Vedanta, Hindustan Zinc, State Bank of India, Hindustan Aeronautics, Reliance Industries, HDFC Bank, Dixon Technologies (India), National Aluminium Co., ICICI Bank, One 97 Communications, and Tata Consultancy Services were the most actively traded underlying stocks Sunday.  End

 

Edited by Tanima Banerjee

 

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