Indian stock markets plunged on Sunday following the hike in the Securities Transaction Tax (STT) on derivatives in the Union Budget 2026, which rattled sentiment. Market experts said this could open up the space to enter certain pockets of the market where valuations have been a concern.
According to Prashant Khemka, founder and managing director, WhiteOak Capital, reading too much into the STT tweak risks missing the bigger picture. “A 1% change in either direction is no big deal. STT is not the reason for the decline as the hike is in derivatives, not cash,” he told NDTV Profit, suggesting the selloff reflects a mismatch between lofty expectations and the Budget’s pragmatic tone. “There was some expectation in the market that this could be an out-of-the-ordinary budget,” he noted.
The STT hike is more a sentiment event than a fundamental headwind for earnings or economic trajectory. Derivatives costs rising can dampen excessive leverage and near-term trading appetite, but it does not directly impair cash-market investing or long-term value discovery.
Matt Orton, chief market strategist at Raymond James Investment, said India’s macro fundamentals remain constructive. “Growth is robust so there’s no necessity to increase stimulus or capex. Fiscal prudence is important for foreign investors,” he told NDTV Profit.
He called the market’s sharp sectoral reactions as “opportunity generators” for foreign investors. “The (negative) reaction to sectors like defence after the budget opens up opportunities for high-quality stocks that fell because of the volatility in the past few sessions,” he said. In other words, indiscriminate selling often misprices quality.
READ MORE: Nifty, Sensex Crash On Budget Day — Here’s Eight Reasons Why
Oversold Readings Hint at a Rebound Setup
Market analyst Kush Bohra pointed to certain near-term technicals that are flashing potential contrarian cues. The Relative Stength Index (RSI) was near 30 for the Nifty on Sunday — traditionally a threshold for oversold conditions, hinting at bounce potential if sellers tire.
The Put-Call Ratio (PCR) is at around 0.56 that signifies deeply oversold territory and suggests excessive bearish positioning that is fertile ground for short-covering rallies.
Bohra said the Nifty is near key support at 24,500, a widely watched level. “There could be a trigger for short covering rally. There is a case for buying at lower levels. There is a case for rebound. The currency and bond market reaction is yet to come,” he said.
ALSO READ: Nifty Short-Term Volatility To Continue, Key Support Lies At 24,500-24,300
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