150% Increase in STT: How Will This Affect Brokerages’ Earnings and Arbitrage Opportunities?

Synopsis:- The Budget 2026 hike in STT, raising futures tax from 0.02% to 0.05% and options from 0.1% to 0.15%, triggered sharp market reactions. Experts warn that trading volumes could decline by around 5%, impacting overall market activity and high-frequency strategies.

The companies took a beating on Sunday after Finance Minister Nirmala Sitharaman announced higher taxes on share trading in the Budget 2026. Companies like BSE, Groww, and Angel One saw their share prices fall sharply.

The impact was immediate and painful. BSE shares dropped 15% at one point during the day, though they recovered slightly to close 8% lower. Angel One fell 9%, while Groww lost nearly 6% of its value. These companies earn more when trading activity rises, so higher taxes have made investors nervous.

What Changed in the Budget?

The government increased the Securities Transaction Tax (STT) – a tax people pay when buying or selling shares. For futures trading, the tax jumped from 0.02% to 0.05%. For options trading, it went up from 0.1% to 0.15%. These might seem like small numbers, but they make a big difference for active traders.

What Experts Are Saying

Jefferies, a major financial research firm, called this move “bad news” for broker companies. After talking to industry experts, they believe trading volumes could drop by 5%. Their analysis shows BSE and Groww might see their daily trading activity fall by 5%, which could hurt their profits by about 4%.

Bernstein, another research firm, pointed out that high-frequency trading firms will feel the pinch most. These are companies that make thousands of trades per second using computer programs. The higher tax eats into their already thin profit margins.

This matters because companies like Nuvama Wealth depend heavily on these high-speed traders as clients. If these traders make less money or trade less often, it hurts the entire chain of stock market businesses.

Who Gets Hurt More?

Not all traders will suffer equally. According to Bernstein, firms that play it safe by staying “market-neutral” (not betting on market direction) will struggle more. Those who take bigger risks by betting on market movements might handle the tax increase better.

The Bigger Picture

The government’s decision to raise STT shows it wants to control excessive speculation in the markets. However, this comes at a cost for the stock broking industry. Trading platforms, exchanges, and related service companies all depend on active trading to make money.

As these companies adjust to the new tax reality, investors are watching closely to see how trading volumes actually change. The real impact will become clear in the coming weeks as traders decide whether to continue with the same intensity or pull back due to higher costs. For now, trading in F&O just got more expensive, and the companies that facilitate this trading are paying the price.

In conclusion, the higher STT is likely to weigh on trading volumes and brokerages’ earnings, especially those reliant on derivatives and high-frequency traders. While the government aims to curb excessive speculation, the near-term impact could be slower activity and margin pressure. The real test will be how quickly traders adapt to the higher costs.

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