BSE, CDSL, HDFC AMC, Groww among other capital market participants in focus ahead of impending STT and LTCG announcements

The capital market participants, like exchanges, brokers, and clearing houses, will remain in focus on the budget trading session amid expectations of reforms in STT and LTCG taxes. The NSE Capital Market index has jumped nearly 37% in the past 12 months despite the sectoral headwinds impacting the capital market activity.

The stock market activity in the past five years has seen exponential growth, with a record number of investors entering the market. While the capital market-related tax reforms have seen more hikes than easing. Industry participants like MCX, BSE, and AMFI expect the easing of taxation for the capital market, as it would provide major relief to investors.

Association for Mutual Funds in India (AMFI) has suggested a complete exemption on LTCG arising from equity mutual fund investments held for more than five years, in order to promote long-term wealth creation. According to AMFI, the existing exemption limit has not kept pace with rising incomes, inflation, and the growing participation of retail investors in capital markets.

Further, broking participants expect the abolishment of securities transaction tax (STT), which is a long-standing expectation after the reintroduction of long-term capital gains tax in the 2018 budget. The LTCG tax was further hiked to 12.5% in 2024 for the gains above ₹1.5 lakh over 1 year.

Stocks to watch ahead of announcements

On the expectations of a tweak in Securities transaction tax, the broking companies like Groww, Anand Rathi Shares & Stock Brokers, Motilal Oswal, and AMC companies like HDFC AMC, ICICI Prudential AMC, Nuvama, NAM India and exchanges like BSE, MCX will show sharp swings on either side according to the announcements made.

On the other hand, any tweaks in long-term capital gains tax, the broader markets, NIFTY smallcap and midcap stocks will remain in focus as it is the primary indicator for larger investor sentiment.