Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on Sunday, February 1, 2026. The Indian stock market saw a special trading session despite it being a Sunday. The market reacted sharply to the announcements, with both Sensex and Nifty witnessing a heavy fall. The Sensex tumbled by over 1,600 points during the speech, while the Nifty dropped by 600 points. Although there was some recovery in the final hours, the sentiment remained weak among traders and investors.
Major Reasons Behind the Market Crash
The primary reason for the sudden drop in the market was the change in tax rules for traders. The government announced an increase in the Securities Transaction Tax (STT) on the derivatives segment, which directly impacts Future and Options (F&O) traders. The STT on Futures has been increased from 0.02% to 0.05%, and on Options, it has gone up from 0.10% to 0.15%.
Another major factor was the change in taxation for share buybacks. The budget proposed that buybacks will now be taxed as ‘Capital Gains’ for all shareholders. The effective tax rate for promoters has been increased to between 22% and 30%. This news dragged down shares of broking companies like Angel One, BSE Ltd, and Groww, which fell by up to 10%.
Key Market Figures and Commodity Prices
The market volatility increased significantly during the session. The India VIX, which measures market instability, jumped by over 4.5%. While the Sensex touched a low of 80,607.85, it recovered slightly to trade around 81,417 later in the day. Similarly, Nifty fell near the 24,800 mark before stabilizing around 25,000.
The impact was not limited to stocks. The commodity market also saw a sharp decline. On MCX, both Gold and Silver hit a 6% lower circuit. Silver prices saw a massive drop of Rs 17,515 per kilogram. The lack of major income tax relief for the middle class further dampened the mood of retail investors.
Important Budget Announcements
Despite the market fall, the Finance Minister made several big allocations for the country’s growth. The capital expenditure (Capex) for infrastructure has been increased to Rs 12.2 lakh crore, which is higher than last year. The fiscal deficit target for the year 2026-27 has been set at 4.3%.
- Foreign Investment: The investment limit for foreign personal investors increased from 5% to 10%.
- Electronics Sector: A total outlay of Rs 40,000 crore was announced to boost manufacturing.
- TCS Changes: Tax Collected at Source (TCS) on foreign tour packages has been reduced to 2% from the earlier slab of 5% or 20%.
- BioPharma: Rs 10,000 crore allocated for the ‘BioPharma Shakti’ scheme.
