Like any other common man, Indian stock (capital) markets are also expecting taxation relief from the budget, especially the ones that help to strengthen the equity culture in India. Foremost in the market’s wish list is to see lower Securities Transaction Tax (STT) or even abolishing it altogether. The STT is imposed on every transaction involved in buying or selling of stocks. Some pragmatic solutions to encourage long-term participation by investors are also desired by capital markets. If the budgetary expectations are indeed met then the “Nifty might scale up further by over 15% in this calendar year which is quite significant in the current subdued economic environment”, says Mustafa Nadeem, CEO of EPIC Research. Barring the export-driven IT and pharmaceutical stocks, the mood in the overall market remains positive mainly due to domestic factors. The markets argue that even the SEBI (the capital market’s regulator) is in favour of reducing STT to encourage more participation by investors. “So rationalising the STT is very much expected in the budget,” says Mustafa.
“STT has been seen as a major factor in killing the depth of the Indian capital markets as it repels high frequency traders,” says Parth Nyati, co-Founder & COO TradingBells. Another strong argument in favour of abolishing STT is that very soon, India’s International Exchanges will take off and would operate directly in competition to the domestic exchanges by enjoying the benefits of highly relaxed taxation norms. “If the domestic taxation is not relaxed, a lot of money from Indian HNIs and institutions will flow into the International Exchanges, thus further reducing the depth of domestic exchanges,” feels Niyati. The market also feels that its prospects will brighten if taxes on individuals are lowered, with some of the gains channelised into buying shares or bonds.
Nifty 50 has risen by about 5.5% since 1 January, mainly on account of market’s expectations from the budget.