Budget proposal to streamline STT comes as relief for traders: Analysts

The budget proposal on streamlining Securities Transaction Tax has come as a relief for traders as the charge will no longer be made on the value of the contract but on the difference between the strike and the market price only, analysts said Friday.

In her Budget speech, Finance Minister Nirmala Sitharaman said that STT is proposed to be restricted to the difference between settlement and strike price of options.

Welcoming the move, Rohit Srivastava, Fund Manager- PMS, Sharekhan said: "The STT change is a big relief to options traders as the STT charge will no more be made on the value of the contract but on the difference between the strike price and the market price only. For options that close in the money it would not force traders to square up in the last hour of trading as was the case earlier".

"Most traders would try squaring up to avoid the higher STT that made it expensive to hold onto a position that was in the money ahead of a expiry. Now, the cost is not restrictive and one can allow it to expire in the money to lock in gains."