Groww, Angel one and Other Brokerage Stocks Crash Up to 15% After STT Hike on F&O and Buyback

SYNOPSIS: Budget 2026’s sharp hike in STT on futures and options, along with buyback taxation, raised trading cost concerns, triggering heavy selling as broking and exchange stocks like BSE and Angel One fell up to 15 percent.

Union Budget 2026-27 is presented on Sunday, 1st February, by Finance Minister Nirmala Sitharaman, marking her 9th budget and the 88th Union Budget since Independence.

The Budget sets out a broad vision anchored around three key Kartavya. The first focuses on accelerating sustainable economic growth and building resilience; the second is to fulfil the aspirations of the people by making them strong partners in India’s prosperity; and the third reiterates the principle of Sabka Saath, Sabka Vikas, ensuring inclusive growth across regions and communities.

At first glance, the broader market announcements may look encouraging, but for traders, especially those active in futures and options (F&O), the Budget delivered a tougher surprise. The Finance Minister announced a hike in Securities Transaction Tax (STT) on F&O, a move that has clearly raised eyebrows across the trading community.

What Exactly Is STT, and Why Does It Matter to Traders?

Securities Transaction Tax, or STT, was introduced on 1st October 2004 under the Finance Act, 2004. In simple terms, STT is a small tax charged every time you buy/sell securities on Indian stock exchanges. It applies across all equity and derivative transactions, including stocks, equity futures, and options, and is collected right at the time of the transaction.

The logic was simple: collect tax at the source, reduce evasion, improve transparency, and make compliance easier. For the government, it also meant a steady and predictable revenue stream from a fast-growing market.

When STT was introduced, the government made a bold and investor-friendly move of abolishing Long-Term Capital Gains (LTCG) tax on listed equities held for more than one year. STCG continued to be taxed, but at a concessional rate, which was later standardised at 15 percent.

Investor discomfort has been building since the previous Budget, when STT rates were sharply increased. The tax on options selling was raised from 0.0625 percent to 0.1 percent of the option premium, while futures trades began attracting an STT of 0.02 percent on traded value, up from 0.0125 percent earlier. For high-frequency and F&O traders, these changes directly translate into higher transaction costs.

To add to the pressure, the same Budget also increased capital gains taxes. LTCG was raised to 12.5 percent from 10 percent, while STCG moved up to 20 percent from 15 percent. Together, higher STT and steeper capital gains taxes have made trading meaningfully more expensive, leaving many market participants feeling that the tax burden has tilted a bit too far against active investors.

Budget 2026-27: Higher STT and Buyback Tax

Budget 2026-27 brought some unwelcome news for traders and market participants, with the announcements of another hike in STT on derivatives, raising trading costs across F&O. STT on futures has been increased by 150 percent to 0.05 percent from 0.02 percent earlier, while options STT has been raised by 50 percent to 0.15 percent from 0.1 percent. The move is expected to push up transaction costs, potentially weighing on trading volumes across exchanges and brokerage platforms.

While this was not enough, the FM also proposed a capital gains tax on share buybacks. Under the new framework, buyback proceeds will now be taxed as capital gains for all categories of shareholders. This marks a clear shift from the earlier regime, where buybacks were treated like dividends (taxed in the hands of shareholders as per their income slabs), with companies deducting 10 percent TDS before payouts.

Market Reaction: Broking and Exchange Stocks Take a Hit

Markets reacted swiftly to these announcements. Shares of market infrastructure and broking companies came under heavy selling pressure, with several stocks tumbling up to 15 percent. BSE slipped sharply to an intraday low of Rs. 2,377.4, down around 15 percent.

Angel One fell over 13 percent to Rs. 2,201, Billionbrains Garage Ventures (Groww) declined nearly 14 percent to Rs. 152.9 on the BSE, while CDSL fell over 9 percent to Rs. 1,196.3, Nuvama Wealth Management Limited slipped 10 percent to Rs. 1,211.9.

The sell-off was largely driven by concerns that higher STT on derivatives, especially the steep increase in futures and options taxes, could dent trading activity, impact brokerage revenues, and slow overall market participation in the near term.

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