Mumbai: The Indian stock market closed sharply lower on Sunday, February 1, after the Union Budget announcement. The Sensex fell by 1,546 points, or nearly 2 percent, to close at 80,722. At the same time, the Nifty also declined by 495 points and ended the day at 24,825.
The main reason behind this fall was the government’s decision to increase the Securities Transaction Tax (STT) on futures and options (F&O) trading. This made trading more expensive and led to heavy selling in the market.
Higher STT On Futures And Options Hits Sentiment
In the Budget, the government increased the STT on futures from 0.02 percent to 0.05 percent. It also raised the STT on options premium and exercise to 0.15 percent. Because of higher costs, many traders reduced their positions, which caused a sharp fall in stock prices.
Markets Fell Sharply During Budget Speech
During Finance Minister Nirmala Sitharaman’s Budget speech, the Sensex had fallen by nearly 1,800 points at its lowest level, while the Nifty was down by around 550 points. The market had already opened lower, with the Sensex starting 100 points down at 82,156 and the Nifty opening near 25,275.
PSU Banks And Key Stocks Under Pressure
Out of the 30 Sensex stocks, 27 closed in the red and only 3 ended with gains. Shares of BEL, SBI and Adani Ports fell by up to 6 percent. The public sector banking (PSU bank) sector saw the biggest fall of nearly 6 percent. Other sectors like metal, media, FMCG, pharma, financial services and real estate also ended lower.
Last Week Sensex Still Gained 732 Points
Despite the sharp fall on Budget day, the Sensex had gained 732 points over the last week. On January 27, the index rose 319 points to 81,857. On January 28, it climbed another 487 points to 82,344. On January 29, it gained 221 points to reach 82,566. However, on January 30, it fell 297 points to 82,270.
Budget Day Trend Over Last 5 Years
Data shows that Nifty has closed lower in four out of the last five Budget days. Only in 2022-23 did Nifty close higher, rising 237 points. Similarly, the Sensex closed higher in three out of the last five Budget sessions, with a big rise of 848 points in 2022-23.
Overall, the market reaction shows that higher taxes on derivatives have hurt short-term investor confidence, even though the broader market had shown positive movement earlier in the week.
