The reduction of security transaction tax (STT) from 0.125% to 0.1% did not bring much cheer to market participants. The 20% reduction on cash delivery transaction will not attract more investors into stock markets, according to analysts and broking houses. Some even argue for the complete abolition of STT.
"It will have only limited impact as only 10% of the transactions are delivery-based, while 90% of transactions are non-delivery," said Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services. "We were expecting a big relief in terms of STT reduction. That did not happen."
Independent market analyst SP Tulsian echoed the same. "I think the reduction is very minimal and will not help increase the depth of markets," he said. According to him, a 50-70% reduction would have been better while complete abolition is too ambitious. The government collects around Rs 7,500 crore annually as STT since its introduction in 2004-05.