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STT Hike Targets High-Frequency Trading
1 Feb
Summary
- Securities Transaction Tax hike announced in Budget 2026-27.
- Move signals policy shift against rapid trading strategies.
- Experts predict impact on trading volumes and liquidity.
In the Union Budget for 2026-27, Union Finance Minister Nirmala Sitharaman revealed an increase in the Securities Transaction Tax (STT) applicable to both futures and options trades. This fiscal measure has been met with significant attention from market analysts and participants.
Market experts, including Sunil Sanghai of NovaaOne Capital, Naveen Kulkarni of Axis Securities PMS, and Amit Gupta of Motilal Oswal Private Wealth, interpret this STT hike as a clear policy directive. The intention appears to be a discouragement of high-frequency trading and other ultra-short-term trading strategies that have become prevalent in recent times.
Consequently, this policy adjustment is expected to influence the dynamics of the derivatives market. Analysts foresee potential impacts on trading volumes, which might decrease, and on market liquidity, which could also be affected as a result of the revised tax structure.
