FinMin looks to perk up stock markets

Markets have been witnessing massive capital outflow from the country due to fear of a slowing economic growth,high inflation and an uncertain global economic scenario.

The government expects that the reduction in STT and rationalisation of stamp duty will lead to broader market participation,increased volumes and also restore confidence in investors. However,the modalities of bringing about such changes is yet to be worked out,the source said.

The cut will attract foreign institutional investors to the domestic market. High inflation in India and signs of recession in European countries have led to a flight of capital from Indian markets. FII inflows since January have been just $4.3 billion,against $39.5 billion in 2010.

While the STT in futures and options segment is proposed to be 0.003 per cent,it is expected to be 0.0001 per cent in currency derivatives.

The reduction in stamp duty on F&O trading in equities is expected to be 0.003 per cent,presently leviable by states. The finance ministry has proposed to make the rate uniform across states. Market experts have hailed the government’s proposal,calling it positive and timely. Experts said that the move was long overdue.

“The volumes will go up for sure because in India the transaction cost is on the higher side,” Jagannadham Thunuguntla,head of research at SMC Global Securities,said.

He explained that trading volumes in commodities have gone up almost 300 per cent in the past three years due to absence of any transaction tax. The reduction in STT is expected to reduce cost for intra-day players.

The markets world over,have been performing dismally given the sovereign debt crisis in the eurozone.