Brokers Urge Rollback on STT Hike for Market Stability

Stockbrokers have urged Finance Minister Nirmal Sitharaman to reconsider the budget proposal to increase the securities transaction tax (STT). The STT hikes are intended to correct courses in the Futures and Options segment. However, brokers warn this could harm market liquidity and participation.

Stockbrokers on Thursday implored Finance Minister Nirmal Sitharaman to reconsider the proposed increase in the securities transaction tax (STT) announced during the budget presentation on February 1. The hike, aimed at correcting courses in the Futures and Options (F&O) segment, has sparked concerns among financial market participants.

The budget outlined an increase in the STT on Futures from 0.02 percent to 0.05 percent, and on options from 0.1 percent to 0.15 percent. Following the announcement, market volatility surged, prompting the Association of NSE Members of India (ANMI) to request a rollback, highlighting the potential negative impact on market liquidity and overall transaction costs.

In their letter to the finance minister, ANMI emphasized that an 84 percent surge in the cost of Futures trading due to the STT hike could deter participation and hinder market vibrancy. They advocated for a balanced approach in taxation to ensure efficient risk management and sustain India's competitive position in global markets.

(With inputs from agencies.)