STT Hike Won’t Hit Retail Investors, Says Deepak Shenoy
STT Hike Won’t Hit Retail Investors, Says Deepak Shenoy
Budget raises STT on futures to 0.05%, but veteran investor Deepak Shenoy says retail players won’t face a major blow; arbitrage funds may see about a 0.5% hit next year.
The government’s budget proposal to raise the Securities Transaction Tax on futures contracts to 0.05% from 0.02% has sparked a debate about its real impact on different market players. Market watchers note that the change is aimed at cooling speculative activity and strengthening systemic risk controls in the derivatives market. Investors will be watching closely how the higher STT reshapes trading costs and behavior across asset classes.
Among the biggest talking points is the role of arbitrage funds, which account for a large share of futures activity. A prominent market voice suggests that returns for these funds could be modestly pinched by roughly 0.5% next year due to the elevated STT, though this is not expected to derail the broader strategy of exploiting price differentials.
Foreign investors, who frequently use futures to gain exposure at a lower impact cost, could also feel indirect effects as trading costs shift. Still, the core objective of the tweak is to curb speculative trading while encouraging more durable, long-term positioning.
Industry participants pointed to the timing of the move as the market digests a headline budget that prioritizes growth in infrastructure, defense, and other long-term investments, while emphasizing policy stability to attract foreign investment. The overall message is that while short-term trading costs may rise, the policy framework remains focused on reducing systemic risk and promoting a steadier investment climate.
