Finance Minister Nirmala Sitharaman on Sunday moved to tighten India's overheated derivatives market, proposing a steep hike in the Securities Transaction Tax on futures and options trades.
The change aims to curb rampant speculative activity in F&O, which regulators say has pulled in a wave of retail traders suffering consistent losses.
The Finance Minister said: "I propose to raise the STT on Futures to 0.05 percent from present 0.02 percent. STT on options premium and exercise of options are both proposed to be raised to 0.15 percent from the present rate of 0.1 percent and 0.125 percent respectively."
The proposal more than doubles the cost of trading futures and sharply increases the tax on buying, selling or exercising options. Markets reacted immediately. At 12:30 PM, BSE shares were down around 14 percent, brokerages Angel One and Nuvama sank 10 percent, and the NSE Capital Market index slipped 6 percent.
The move follows repeated warnings from SEBI. The regulator's study showed nine out of ten individual traders in F&O lose money, and industry executives had called for higher taxes on derivatives to shift activity back to the cash market. Analysts said the Budget's intention is clear: traders should slow down, not stop.
Market voices welcomed the sharper line. Veteran investor Shankar Sharma wrote on X that derivatives were “poison x cocaine” for young traders and added, “It cannot be stopped but it can be taxed the hell out of. Kudos to the Finance Minister.” Kotak Securities MD and CEO Shripal Shah said the increase was likely to raise impact costs and cool volumes, adding that the intent appeared to be “volume moderation rather than revenue maximisation.”
Portfolio manager Divam Sharma said the hike signals a policy shift toward closer scrutiny of speculative trading. He added that the direct impact on brokerage business models might be limited, and the real test will be how derivative volumes behave in coming quarters.
Recent SEBI data shows the equity derivatives market was already slowing in late 2025, with average daily turnover in futures falling 11 percent month‑on‑month and options premium turnover down 8 percent, though options volumes remained higher than a year earlier.
What changed, in plain language
- Futures STT: Up from 0.02 percent to 0.05 percent.
- Options STT on premium: Up from 0.10 percent to 0.15 percent.
- Options STT on exercise: Up from 0.125 percent to 0.15 percent.
What it means: Every F&O trade now costs more. Frequent, high‑volume speculative trading becomes less attractive, which is exactly what the government wants. Brokers fell because lower F&O volumes could hit their revenue.
