STT Hike: Government Gains 10,000 Crore, Market Loses 10 Lakh Crore

• The budget's decision to increase Securities Transaction Tax (STT) aims to generate an additional 10,000 crore rupees in tax revenue for the government.
• On budget day, the stock market experienced a notional loss of nearly 10 lakh crore rupees in market capitalization, shaking investor confidence.
• The STT hike is seen by some as a move to curb retail speculation in derivatives, where a SEBI study shows 9 out of 10 small investors incur losses.
• Traders and the broking industry are concerned that increased STT will raise trading costs, potentially reducing activity in futures and options and impacting high-frequency trading.
• The market was already slowing down, with a decline in derivatives turnover, and the STT hike is feared to exacerbate this trend, posing a challenge for market liquidity and participation.

Why It Matters: STT hike benefits government revenue but raises concerns about market stability, investor confidence, and trading costs.