BSE, CDSL, Angel One, Groww plunge up to 10% after STT hike for F&O trades

Finance Minister Nirmala Sitharaman, on Sunday, February 1, in her Budget speech, announced major changes in STT.

The Finance Minister announced a hike in STT for futures trade from 0.02% to 0.05% and raised the STT on options trade to 0.15%. Soon after the announcement, the capital market index fell by over 6% at 4,365 on Sunday afternoon. The NIFTY50 fell 95 points, and the SENSEX fell 272 points at 12:17 pm.

The announcement came in sharp contrast to the broader expectations of the abolishment of STT in the current budget. Following the development, the shares of the capital market ecosystem plunged up to 10%. Shares of BSE Ltd plunged 10% to ₹2517 apiece, followed by Angel One down 10%, 360 One down by 10%, Groww 8.7% and Nuvama 8.1%

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.

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.