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Tags: Stock Market

The government has decided to allow up to 15 per cent foreign shareholding in domestic exchanges

India’s 3.05 crore retail investors, inc­luding 2 lakh high networth individuals, have got a mixed bag in the Budget. While the finance minister has raised the securities transaction tax (STT) for option trading in the derivative segment and imposed an add­itional 10 per cent dividend tax for wea­lthy investors, he has refrained from tinkering with the long-term capital gains tax, as many feared.

Seeking to deepen the market and attract more investors, the Budget proposes tax incentives for mutual funds and new derivative products.

Significantly, the government has decided to allow up to 15 per cent foreign shareholding in domestic exchanges. This should boost investments and improve the overall functioning of the bourses.

“Higher STT on options could be a cause of concern, as it pushes up the cost for derivative participants,” Kotak Securities CEO Kamlesh Rao said.

The move could hit liquidity in the option segment, as large players like FIIs, especially hedge funds who are active in the option market, will find their cost of trade going up.

“The derivative market is a very price sensitive. Any rise in cost will eat into the margins of players, especially large FIIs,” says Vikram Dhawan, director, Equentis Capital.

Wealthy domestic investors, who number around 2 lakh, will be impacted by the 10 per cent tax on dividends in excess of Rs 10 lakh. “This will considerably reduce the dividend yield for investors in a market which is going through a downswing, said Dhawan.

ashwinpunnen@mydigitalfc.com

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