4 min readMumbaiFeb 3, 2026 03:00 AM IST
The markets ended over 1% higher Monday, regaining more than half the rout they suffered post the Union Budget FY27 on Sunday when the unexpected proposal to hike the securities transaction tax (STT) on futures and options (F&O) segment spooked the investors.
After a slow start to the session, when the 30-stock BSE Sensex had fallen 0.4%, it staged a 336-point comeback from its intraday low to eventually end the session up 943.52 points or 1.2% at 81,666.46 points. The Nifty 50, the benchmark index of the NSE, also closed 262.95 points or 1.1% higher at 25,088.40 points.
Monday’s rally followed what analysts termed a “knee-jerk” reaction to the hike, with global brokerage Jefferies saying it was negative for sentiment, but the market structure was largely unaffected. It estimated around a 5% impact on F&O trading volumes.
The markets on Sunday had seen their second sharpest Budget-day fall in the NDA government since 2014 after Finance Minister Nirmala
Sitharaman proposed to raise the STT on futures to 0.05% from 0.02% in order to curb “speculative trading” in the segment, generating additional revenues for the Centre. Meanwhile, STT on options premiums and the exercising of these options was proposed to be raised to 0.15% from 0.1% and 0.125%, respectively.
Despite the rally, the indices are unlikely to immediately recover to their pre-Budget levels, having fallen to a near four-month low in Sunday’s trading session, as negatives such as low earnings growth persist.
The change in STT may also keep foreign investors away and hold the rupee under pressure.
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“After a sharp fall, the Nifty has seen a strong bounce, which is a normal market reaction. However, the broader trend remains weak,” said Rupak De, senior technical analyst at LKP Securities. Many investors also treat a sharp fall in the stock market as an opportunity to invest at cheaper levels.
According to Pravin Bokade, head of research at IDBI Capital Markets & Securities, “The impact (of STT hike) will definitely be negative in the short term. My worry is that if the market remains low and does not generate returns as we have been seeing in the past few months, many sections such as retail and F&O players may start exiting their positions, draining liquidity further.”
Infrastructure and capital goods stocks were among the top gainers in the market on Monday. “The Budget announcements for FY27 reflected policy continuity on capex while maintaining fiscal prudence as well. Capex allocation of Rs 12.2 trillion (11.5% growth year-on-year) is higher than expected, forming 3.1% of GDP in FY27,” said JM Financial. A higher outlay on capex will result in increased revenue for many infrastructure and capital goods firms.
Real estate stocks also gained, extending the slight rise seen on Sunday post the Union Budget announcement, as a push to build more data centers and global capability centers is positive for these companies. The proposal to offer a tax holiday until 2047 for foreign companies that provide cloud services globally using data centre infrastructure based in India is also likely to indirectly boost earnings for the sector, according to brokerage CLSA. Shares of oil marketing companies also surged on lower crude oil prices globally in the wake of easing geopolitical tensions between the US and Iran.
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Most depositories, exchanges, and brokerage stocks also bounced back after bleeding heavily post the STT changes on Sunday. Most public-sector bank stocks also recovered a bit after falling sharply post the Budget, as the government’s higher-than-expected gross market borrowings estimate for FY27 would lead to a 5-10 basis point rise in bond yields, which will in turn affect treasury income for banks, hitting PSU banks harder than private-sector peers, said global brokerage CLSA.
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