Higher STT rattles brokerage stocks as government tightens grip on derivatives speculation
Shares of Groww slumped sharply after the Union Budget proposed steeper taxes on futures and options trading. The move spooked investors wary of slowing derivatives volumes.
The stock plunged as much as 14% intraday to INR 152.9, dragging Groww’s market capitalisation below INR 1 lakh crore. Is this the clearest signal yet that easy growth from F&O is fading?
Budget Shock Hits Brokerage Stocks
Finance minister Nirmala Sitharaman announced a hike in Securities Transaction Tax (STT) during her ninth Budget speech, targeting speculative activity in derivatives.
- STT on futures raised to 0.05% from 0.02%
- STT on options premium increased to 0.15% from 0.1%
- STT on options exercise lifted to 0.15% from 0.125%
The tax hike works like friction on a fast-moving engine—small in isolation, but powerful enough to slow the system. Could higher costs finally cool India’s hyperactive options market?
Angel One Caught in the Downdraft
Selling pressure was not limited to Groww. Rival Angel One saw its shares crash up to 13% intraday, underscoring sector-wide concerns.
Both stocks closed off their lows but remained deep in the red, reflecting investor anxiety over future trading volumes and brokerage revenues.
Why the Government Raised STT
The tax department defended the move, citing staggering derivatives volumes. According to its post on X:
- India’s GDP stands near INR 300 lakh crore
- F&O transaction volumes exceed INR 1.5 lakh lakh crore, over 500x GDP
“There is justification for an increase in rates to curb purely speculative activity,” the department said. When trading dwarfs the real economy by that margin, was regulatory pushback inevitable?
Regulatory Squeeze on Retail F&O
The STT hike builds on years of tightening oversight. In July 2024, Securities and Exchange Board of India proposed curbs to rein in retail derivatives trading.
Measures included tighter disclosures, expiry-day restrictions, and higher compliance for brokers. These steps aimed to improve risk awareness and reduce speculative excess.
The impact is already visible:
- F&O notional average daily turnover fell 38.07% between June 2024 and June 2025
- Retail participation dropped 36.31% in the same period
Is this the end of the retail options frenzy that powered broker growth post-pandemic?
Groww’s Pivot Beyond Derivatives
Once heavily reliant on F&O revenues, Groww has been diversifying aggressively. Its platform now spans mutual funds, stocks, IPOs, ETFs, commodities, lending, and wealth management.
A key focus is asset management. In Q3 FY26, Groww announced a deal with State Street Investment Management, which will acquire a 23% stake in Groww’s AMC for INR 580.02 crore.
Groww is also bidding for PGIM India Asset Management, signalling ambition to build a long-term, fee-based business less exposed to trading cycles.
Financial Snapshot
Despite revenue growth, profitability took a hit:
- Net profit fell 28% YoY to INR 546.9 crore in Q3 FY26 due to a one-time incentive provision
- Operating revenue rose 25% YoY and 18% QoQ to INR 1,216.1 crore
Groww shares ended the session 5.11% lower at INR 168 on the BSE. Angel One closed 8.9% down at INR 2,312.45.
TL;DR
Groww shares slid up to 14% after the Budget raised STT on F&O trades. Angel One also fell sharply. The move aims to curb speculative derivatives trading, which dwarfs GDP. Regulatory tightening has already cut F&O volumes and retail participation, forcing brokerages like Groww to pivot beyond trading-led growth.
AI summary
- Budget hikes STT on futures and options
- Groww, Angel One stocks tumble intraday
- Govt cites excessive speculative F&O volumes
- Retail participation already declining
- Groww pivots toward asset management
