look news india
The government has increased the Securities Transaction Tax (STT) in the Budget to dampen the enthusiasm of retail investors in the derivatives market. The implementation of the rule has started from October 1.
But from the trading volume figures of the last two weeks, it seems that this decision is not having any significant impact. Ulta's average daily volume in the last three months has increased from Rs 511 lakh crore in October to Rs 562 lakh crore. Not only this, on monthly basis this amount in September is more than Rs 537 lakh crore. Data from both the National Stock Exchange and BSE are included in the daily average volumes. Experts now feel that increasing STT alone is not enough to keep investors away from F&D. The benefits of the derivatives market far outweigh the increased risks. It is clear that the increase in STT has not disillusioned people with the derivatives market. But this may change if additional restrictions are implemented. F&O traders are commonly seen trading in options. Since, it offers better leverage and volatility than stocks.
In the general budget, the government has increased the STT for option trading from 0.0625 percent to 0.1 percent. Whereas STT for futures was increased from 0.0125 percent to 0.02 percent. Which has been implemented from October 1. The move, coupled with changes in transaction charges by brokerage houses, has increased the premium to Rs 2,303 per crore on the sell side on the NSE and Rs 2,050 per crore for options on the BSE. Similarly, there has been a net increase of Rs 735 per crore on sales in futures trading. No doubt traders have ignored the STT increase so far. But analysts have warned that Sebi's upcoming strict F&O rules, which are scheduled to come into effect on November 20, could have a more significant impact on trading volumes. These include an increase in contract size, rationalization of weekly expiry conditions and a two per cent increase in the loss margin on short option contracts.