Market veteran Shankar Sharma said he welcomed the Budget mainly because the government raised the securities transaction tax (STT) on derivatives, a move he said could curb futures-and-options activity among retail traders.
“I love this Budget for ONE major reason: hiking of STT on derivatives,” Sharma said in a reaction shared after the speech. He said derivatives trading had harmed young participants and said the effect would last for years.
I love this Budget for ONE major reason: hiking of STT on derivatives. Derivatives are a poison x cocaine, eating away at the roots of our youth. Its destructive effect will be felt by generations. It's a pure wealth transfer from the traders to F& O specialist brokers, who have…
— Shankar Sharma (@1shankarsharma) February 1, 2026
Finance minister Nirmala Sitharaman announced higher STT rates for derivatives in her Budget 2026–27 speech, positioning the move as a “course correction” for the futures-and-options segment and a revenue measure. The Budget raises STT on futures to 0.05% from 0.02%. It also raises STT on options premium and options exercise to 0.15%, from 0.1% and 0.125%, respectively.
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Sharma framed the STT increase as the Budget's main outcome for markets, and he treated it as an attempt to limit speculative turnover in derivatives.
He said the derivatives segment had drawn in young participants and described it as harmful. “Derivatives are a poison x cocaine, eating away at the roots of our youth,” he said, calling the impact a long-lasting one.
Sitharaman did not link the change to investor protection in the speech. She described it as a “course correction” in the derivatives segment and said it would “generate additional revenues” for the government.
The tax changes are mechanical in design. STT applies per transaction, so a higher rate increases the cost of trading for participants who buy and sell frequently, including intraday strategies that rely on turnover. By raising the transaction levy, the government increases the all-in cost of derivatives trades alongside exchange fees and other statutory charges. The speech does not quantify the expected impact on volumes or participation.
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