The Sensex and Nifty plummeted after Finance Minister Nirmala Sitharaman proposed to increase Securities Transaction Tax (STT) in the Union Budget 2024.
The announcement of a proposed increase in the Securities Transaction Tax (STT) by Finance Minister Nirmala Sitharaman during her Union Budget 2024 speech sent the stock market plunging downwards.
The benchmark BSE Sensex fell by over 900 points to a low of 79,515.64. This was a loss of 1.23% or 986.44 points and the NSE Nifty fell below ₹24,300.
What is securities transaction tax?
Securities transaction tax is a direct tax that is levied on the sale of securities on the stock exchanges like equity shares, derivatives (Futures and options), and units of equity mutual funds.
Why did an increase in securities transaction tax lead to the stock market tumbling?
STT is paid on top of the transaction value of the security. Therefore, a higher rate of STT increases the transaction value of the security. This can reduce the demand for buying shares and increase the demand for selling them, leading the market to crash.