Sitharaman Defends STT Hike: Deterrent to Curb F&O Speculation
Nirmala Sitharaman describes the STT increase as a deterrent to curb F&O speculation excesses.
Finance Minister Nirmala Sitharaman on Sunday defended the recent increase in Securities Transaction Tax (STT), stating that the move was aimed at curbing excessive speculation in the futures and options (F&O) segment rather than discouraging genuine market participation. Speaking at the NDTV Profit Conclave 2026, she described the decision as a “deterrent measure” designed to address growing speculative behavior.
Responding to concerns that the higher STT could dampen trading sentiment, Sitharaman pushed back against what she termed “doom talk” around the markets. She stressed that the intent was not to penalize real investors or traders but to act as a corrective step against practices that could destabilize the financial system. According to her, the tax hike functions like a “pill” meant to counter speculative excesses.
The finance minister also credited domestic retail investors for providing resilience to Indian markets during periods of global uncertainty. She noted that despite significant foreign institutional investor (FII) outflows, markets continued to function smoothly due to sustained participation from retail investors, underscoring the growing depth of India’s investor base.
Sitharaman argued that unchecked speculation in the derivatives market poses systemic risks if left unaddressed. The STT increase, she said, was intended to discourage malpractice and excessive short-term bets while ensuring that long-term, value-driven investment activity remains unaffected. She reiterated that regulators and policymakers remain mindful of balancing market growth with financial stability.
The remarks come amid broader discussions around rising retail participation in F&O trading and concerns over losses incurred by inexperienced investors. Regulators have previously flagged the need for safeguards to prevent speculative trading from overwhelming genuine hedging and investment activity.
With the government standing firm on its rationale, Sitharaman’s comments signal that the STT hike is part of a wider effort to promote disciplined market behavior. For now, policymakers appear confident that the measure will serve as a targeted deterrent rather than a disruption to India’s broader capital market ecosystem.
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