The reduction of Securities Transaction Tax is not a big ‘game-changer' said marketmen. However, the probable impact could be an increase in interest in delivery-based transactions, they said.
The STT for delivery-based transactions was reduced by 20 per cent from 0.125 per cent to 0.1 per cent.
The broking industry which has been grappling with decreasing volumes over the last two years had been asking for removal of STT to attract more investors.
Little difference
“The reduction of STT by 20 per cent is a token amount. If it had been completely removed, there would have been much more simplicity. For now, it hardly makes any difference,” said Mr Rajiv Deep Bajaj, Vice-Chairman and Managing Director, Bajaj Capital.
Only 20-25 per cent of trading on the bourses is delivery-based. This has also been in the decline in the last two years because of poor market performance. Delivery-based transactions for the large-cap stocks is around five per cent while for the small- and mid-cap stocks it is much higher, said marketmen.
The reason for this is that trades are higher in the case of large-cap stocks, while small- and mid-cap stocks being largely illiquid are not be traded as much and will mostly involve delivery-based transactions.
“The reduction of STT will see indirect benefits for the market. While the STT is not going to bring about huge benefits to brokerages or investors, it will promote delivery-based trading among investors,” said Mr Chokkalingam G, Executive Director and Chief Investment Officer, Centrum Wealth Management.