Union Budget 2026: Market Reaction and Key Takeaways
01, February 2026. By -Kaushik
Today, February 1, 2026, Finance Minister Nirmala Sitharaman presented the Union Budget 2026. For the stock market, it was a day of high drama, a “Sunday Special” trading session that saw the Sensex and Nifty experience significant volatility.
If you are an investor or a trader, understanding these shifts is crucial. Here is a simple breakdown of the Union Budget 2026 and its immediate effects on the Indian stock market.
The initial reaction from Dalal Street was one of caution, followed by a sharp sell-off in the derivatives segment. While the budget focused heavily on long-term infrastructure and manufacturing, certain tax changes caught traders off guard.
1. The “STT Shock” for F&O Traders
The most immediate impact on the stock market came from the hike in Securities Transaction Tax (STT) on the Futures and Options (F&O) segment.
Futures: STT raised from 0.02% to 0.05%.
Options: STT on premium raised from 0.10% to 0.15%.
This move is seen as an effort to curb excessive retail speculation in the derivatives market. Consequently, brokerage and exchange-related stocks saw a sharp decline during the session.
2. Massive Capex: A Win for Infrastructure
On the bright side, the government has announced a record ₹12.2 lakh crore capital expenditure (Capex) for FY27. This is a massive 22% jump from the previous year.
Beneficiary Sectors: Cement, Steel, Capital Goods, and Construction.
Stock Impact: Companies involved in railways, high-speed rail corridors, and road construction are expected to see long-term gains as these funds are deployed.
3. New Foreign Investment Rules
In a major reform to deepen the market, the government has allowed individual foreigners to invest directly in Indian equities through the Portfolio Investment Scheme.
The individual ownership limit was raised from 5% to 10%.
The aggregate limit for such investors was increased to 24%.
This is a “up” for market liquidity, as it opens the doors for a new pool of global capital beyond just institutional FIIs.
Sector-Wise Impact at a Glance
Sector Impact Key Reason
Infrastructure 🟢 Positive ₹12.2 Lakh Crore Capex allocation.
Manufacturing 🟢 Positive Launch of Semiconductor Mission 2.0 and PLI schemes.
Banking (PSUs) 🟡 Neutral Focus on fiscal consolidation (4.3% deficit target).
Broking/Exchanges 🔴 Negative Higher STT rates making trading more expensive.
Pharma/Biotech 🟢 Positive ₹10,000 Crore “Biopharma Shakti” scheme.
4. Fiscal Prudence and the Macro Picture
The Finance Minister stayed committed to the “glide path” of fiscal consolidation, targeting a fiscal deficit of 4.3% for FY27. For the stock market, this is a sign of economic stability. Lower government borrowing typically leads to stable interest rates, which is always a positive signal for equity valuations in the medium to long term.
5. Changes in Buybacks
Another technical but important change: Share buybacks will now be taxed as capital gains for shareholders. This simplifies the tax structure for investors but might change how promoters plan their exit strategies or reward shareholders in the future.
The Bottom Line for Investors
The 2026 Budget is a “Growth Budget” hidden behind a “Taxing Tablet.” While the hike in STT caused a temporary crash in the indices during the special Sunday session, the massive push for infrastructure, semiconductors, and foreign individual participation provides a strong foundation for a structural bull run.
Disclaimer :
This blog does not provide financial, investment, or trading advice. All content is for educational and informational purposes only. Please consult a certified financial advisor before making any investment decisions. The author will not be responsible for any financial losses incurred
