Fiscal Policy Shockwave: Securities Transaction Tax Hike Triggers Historic Budget Day Market Collapse

Intelligence analysis confirms a seismic market disruption triggered by the Union Budget's proposed Securities Transaction Tax (STT) increase, resulting in the most severe single-day point decline for the Sensex in Budget history. Initial optimism during the Finance Minister's address propelled the index upward by over 400 points, reflecting anticipated pro-growth measures. This sentiment reversed catastrophically upon the STT announcement, precipitating an immediate plunge of approximately 1,100 points as algorithmic and institutional trading reacted to the perceived increase in transaction costs and reduced liquidity attractiveness. A mid-session technical recovery of roughly 500 points demonstrated residual market resilience but proved ephemeral. The session concluded with the Sensex breaching the psychologically critical 81,000 support level—a threshold not crossed in four months—signaling a profound loss of investor confidence. This volatility pattern underscores acute sensitivity to fiscal policy adjustments impacting capital market mechanics. The event represents a significant recalibration of risk assessment by domestic and international portfolios, with implications for near-term capital flows and equity valuation models. The scale of the reaction suggests market participants had largely discounted the possibility of such a direct transaction cost intervention, marking a pivotal moment in fiscal-market relations.