Markets Impact

MARKETS/COMMODITIES

Hike in STT to have negligible impact fe Bureaus   The proposed hike in the Securities Transaction Tax (STT) in the Union Budget presented on Monday is expected to have negligible impact on the bourses as well as market sentiment as the increase has been much lower than expected. Marketmen were expecting the existing rates to be hiked by 100% but the actual hike has been only 33% for both, delivery-based as well as non-delivery-based transactions. The government is expected to mop up additional Rs 420 crore from hike in STT. The Centre has anticipated around Rs 450 crore as revenue from this tax for six months period ending March 31, 2005. The STT was proposed in the last interim budget presented by P Chidambaram in June ’04 and was introduced from October 1, ’04. The delivery-based transactions were charged STT at the rate of 0.015%, non-delivery-based (speculative) transactions at the rate of 0.015% and derivatives trade were charged at 0.01%. The new proposed rates of STT for delivery-based are 0.20%, for non-delivery based, it is 0.020% and for derivatives transactions it will be 0.0133%. Nimesh Kampani, chairman and managing director, JM Morgan Stanley Pvt Ltd, said, “The finance minister has handled well the marginal hike in STT on all transactions in the securities market. However, the STT on mutual fund unit transactions is unwarranted as it would tantamount to double taxation.” Sushil Muhnot, MD and CEO, IDBI Capital Markets said, “It is negative for the markets. We were expecting that the STT would be doubled. But that did not happen. It’s mildly negative for the markets. But there are other positive announcements that has made this negative a non-event.” Ashish Jauhari, Vice President-Emerging Capital Advisor Ltd said, “The hike in STT is marginal and will not impact the delivery-based transactions negatively. On the whole, the hike in STT was on expected lines and is only mildly negative. It’s a market-neutral Budget with the silver lining being the commitment to implement VAT. Textiles, leather, agriculture, and infrastructure have received a boost and this is in sync with the consistency of reforms. On the whole, it’s a balanced Budget with fewer rollbacks expected.

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