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STT Recalibration Aims to Boost Long-Term Equity Investment: BSE CEO

The recalibration of the Securities Transaction Tax (STT) in the Union Budget is designed to shift investor focus towards long-term equity participation, according to BSE's CEO. The budget emphasizes massive capital expenditure and fiscal discipline to advance India's growth pillars. While some experts warn the STT hike may squeeze short-term market liquidity and leverage, others see it as positive for equities by making speculative options trades more expensive. The overall narrative positions India as a resilient, future-ready investment destination with deepening capital markets.

Key Points: Budget STT Recalibration for Long-Term Equity Focus

  • STT recalibration for long-term equity
  • Rs 12.2 lakh crore capex push
  • Focus on deepening bond markets
  • Mixed views on market liquidity impact
2 min read

STT recalibration to encourage investors focus on long-term equity participation: BSE CEO

BSE CEO says STT changes encourage long-term equity participation. Experts analyze impact on market liquidity and India's investment future.

"reinforces India's standing as a resilient and future-ready investment destination - Sundararaman Ramamurthy"

Mumbai, Feb 1

The recalibration of Securities Transaction Tax is designed to encourage investors focus on long-term equity participation, thereby fostering healthier liquidity and more sustainable market dynamics, said Sundararaman Ramamurthy, MD and CEO, BSE, on Sunday.

In an environment of global uncertainty, this Union Budget "reinforces India's standing as a resilient and future-ready investment destination, with capital markets that are becoming deeper, more balanced, and strategically aligned with long-term economic priorities, Ramamurthy said in a statement.

The Budget marks another significant step towards realizing the vision of Viksit Bharat, with a strong emphasis on capital formation, fiscal discipline, and the advancement of key growth pillars such as infrastructure, manufacturing, services, and SMEs.

The BSE CEO said that from a market standpoint, the measures announced - ranging from initiatives to deepen corporate and municipal bond markets, enhanced investment limits for PROl, adjustments to the buyback tax, and other reforms - are clearly development-oriented.

"The proposed public capital expenditure of approximately Rs 12 trillion (Rs 12 lakh crore) is poised to generate a substantial positive impact across the economy," he noted.

Raamdeo Agrawal, Chairman and Co-founder, Motilal Oswal Financial Services Ltd, said the budget is a masterstroke for India's digital future.

"However, we must be realistic about the impact of STT on capital markets. The STT hike and the removal of dividend set-offs seem to be bringing a headwind to markets. They make many high-frequency and arbitrage trades unviable, which will squeeze market liquidity and leverage in the short term," he said in a statement.

But with a prudent 4.3 per cent fiscal deficit and a Rs 12.2 lakh crore capex push, the long-term earnings story remains the real hero for India," Agrawal added.

Anand James, Chief Market Strategist, Geojit Investments Limited, said that on the face of it, the STT hike is equity positive as option trades becomes more expensive.

"Obviously, at a portfolio level, the hit on derivative segment could lead to rebalancing, and drag the equity segment in the near term. But it is hard to say that the hike alone will dissuade the speculative interest tied to derivatives market, especially the options," he said.

- IANS

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Reader Comments

P
Priya S
I appreciate the intent, but as a small retail investor, I'm worried about reduced liquidity in the short term. My options strategies, which helped hedge my portfolio, might become too expensive. Hope the long-term benefits outweigh these initial pains.
A
Anand James
(Not the strategist from the article!) As someone with the same name, I find this fascinating. The BSE CEO makes a valid point about fostering healthier markets. The ₹12 lakh crore capex push is the real story here – that's where the jobs and growth will come from.
S
Sarah B
Interesting to see India taking such a strategic approach. The focus on deepening bond markets and fiscal discipline (4.3% deficit is impressive) signals maturity. This should boost foreign investor confidence significantly. Well-calibrated budget.
K
Karthik V
"Viksit Bharat" is not just a slogan. This budget walks the talk. Making high-frequency trading less viable might hurt some funds, but it protects the common investor from volatile swings caused by algo trades. Long-term participation is the key to wealth creation.
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Michael C
A respectful criticism: While the long-term vision is good, the communication around STT changes could have been clearer for the average investor. The immediate market reaction shows confusion. More investor education initiatives should accompany such reforms.
N
Nisha Z

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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