Geojit, Motilal Oswal, other brokerage stocks fall after FM hikes LTCG, STT

LTCG has been hiked to 12.5% from 10%, while short-term capital gains tax will be 20% on all financial assets.

Also, STT on the sale of an option in securities has been increased from 0.06% to 0.1% of the option premium. The sale of futures in securities has increased from 0.01% to 0.02% of the price at which such futures are traded.

Market participants were expecting this announcement, as the Sebi chairperson and other authorities had expressed their concerns over the sudden spike in derivative trading volumes, during which nine out of 10 traders lose money.

Experts said that HFTs, algo and intraday traders will be hit by the STT hike.

Also, it will adversely impact traders who make their money from volumes. The increase in STT will result in lower profits for intraday traders, and HFTs will now have to look for other strategies to make money.

A few analysts believe that increased STT will dry up the liquidity and may also result in the removal of stocks from the derivatives segment.

High-frequency trading firms or traders (HFT) use complex algorithms and computers with high specifications to execute trades at very quick speeds. The motive of these firms and traders is to capture the spread between the spot and futures prices.

Following the budget announcement, the market crashed over 1.5% with most of the broader and sectoral indices sinking in red. The BSE benchmark, Sensex tanked over points 1000 points but managed to cut some of the losses and was down 500 points at 79,992.23 at 1:15 PM.