Budget 2026 | The option to put a price on risk may mean paying a price in the future: Nithin Kamath

The government wants to maintain budget discipline. The country has increased investment year after year, but has tried to borrow too much and leave some room in case something goes wrong. Given the global uncertainty at the moment, this was always going to be a difficult budget. That said, I was hoping there wouldn’t be any major negative impacts on capital markets. Last year it was mainly a non-event. This is not the case this year.

The most immediate change you will feel is in trading costs. The STT increase, for futures from 0.02% to 0.05%, and options from 0.1% to 0.15%, is not insignificant. This is not what I was hoping for and the market reacted negatively.

We have known for some time that the government and regulators are uncomfortable with the explosion in retail F&O volumes, and they are putting a price on it. For active traders, this simply means higher friction and a higher breakeven. Volumes may take a hit as we are no longer in a bull market as it was the last time the STT was increased in the 2024 budget.

In addition to trading costs, there is the change around government gold bonds (SGBs) that would have caught many off guard. Many people buy SGBs on the secondary market because they often trade at a discount, and they assume they can still avoid capital gains taxes if they hold them to maturity. But now, the capital gains exemption on redemption only applies if you subscribed to the original issue and held it continuously until maturity. If you purchased SGB on the secondary market, you will not receive this exemption. The budget has also readjusted the buyback story. After the 2024 budget, it treated buyback programs as dividends and taxed them at a flat rate. That made buybacks less attractive for private investors. Now buybacks are shifting to treating capital gains in the hands of shareholders, making them more tax efficient again.

On the plus side, the budget makes a serious attempt to make it easier to buy and sell corporate bonds. There is talk of market making, bond index derivatives and Total Return Swaps. The words sound complex, but the idea is simple: increase liquidity. And the bond market needs a lot more liquidity if we want more risk capital to flow into this asset class.

Finally, the budget signaled support for sectors that can improve export competitiveness, such as deep-tech startups (such as BESS), manufacturing and defense. That is the kind of direction that we as an ecosystem are also trying to support through Rainmatter. But we’ll have to wait for the fine print to understand what this will look like in reality.