News

Published: Mar 25, 2023
Updated: Mar 25, 2023

Indian Shares Extend Losses as Government Hikes STT on Futures and Options

The Finance Ministry clarified on the hike in securities transaction tax (STT) on selling options, stating that it has been increased to 0.0625% from 0.05%. The STT for futures has also been raised to 0.0125% from 0.01%. The new rules will be effective from April 1, 2023.

New Rules

Under the new STT rules, option traders will have to pay Rs 6,250 for every Rs 1 crore worth of turnover, which is a 25% increase from the current rate of Rs 5,000. Additionally, traders selling futures will now have to pay STT of Rs 1,250 on Rs 1 crore of turnover.

FinMin clarifies the hike announced in STT was an "inadvertent mistake"

The Finance Ministry clarified that the increase in STT was an inadvertent mistake and will be revisited in the future. However, the hike will have a significant impact on high frequency traders (HFTs) due to the thin spread in which they operate.

Indian share market remains in the red zone for the 3rd week in row

The Indian shares extended losses for the third consecutive week as investors became cautious following the STT hike on futures and options contracts. Furthermore, lingering concerns of contagion in the global banking sector weighed on investor sentiment.

Markets react negatively

The Nifty 50 index closed 0.77% lower at 16,945.05, while the S&P BSE Sensex fell 0.69% to 57,527.10. All 13 of the major sectoral indexes declined, with the financials index losing 0.69%. On Friday, 41 of the Nifty 50 constituents fell.

Investors approach cautious approach amidst revision in STT rates

The STT hike has led to a cautious approach by investors, causing Indian shares to extend their losses for the third week. The Finance Ministry's clarification on the increase in STT rate may provide some relief to traders in the future. However, the impact of the hike on HFTs and the global banking sector's contagion concerns cannot be ignored.