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Unveiling measures to attract more investors, Finance Minister Arun Jaitley said Sebi would develop new products in the commodity derivatives space apart from taking steps to deepen the corporate bond market.
Seeking to deepen the markets and attract more investors, the Union Budget on Moday proposed tax incentive for mutual funds and new derivative products even as hike in securities transaction tax left stock brokers disappointed.
In a significant move, the government has decided to allow up to 15 per cent foreign shareholding in domestic exchanges, a step which BSE feels would boost investments and improve overall functioning of the bourses.
As part of efforts to expedite cases, the government would increase the benches of the Securities Appellate Tribunal and in this regard, Sebi Act would be amended.
Unveiling measures to attract more investors, Finance Minister Arun Jaitley said Sebi would develop new products in the commodity derivatives space apart from taking steps to deepen the corporate bond market.
Commodity market participants have been demanding introduction of options contracts to deepen the market. However, a proposed increase in securities transaction tax for options may come as a dampener.
Meanwhile, the government has decided to extend capital gains tax exemption to merger of different plans in an mutual fund scheme. Currently, capital gains tax is levied on consolidation or merger of multiple plans within a MF scheme.
"On the domestic front it is perhaps a mixed bag as far as the capital market is concerned. We welcome the proposal to list general insurance companies to the stock exchange platform and focus on corporate bonds in particular," NSE MD & CEO Chitra Ramkrishna said.
In the Budget, STT on sale of stock options has been raised from 0.017 per cent to 0.05 per cent. Jaitley has also proposed a 10 per cent additional dividend distribution tax on individuals, HUFs and firms receiving dividend in excess of Rs 10 lakh per annum.
"I am sure that many are also pleased with the fact the govt has decided to continue with the STT paid transactions rather than introducing other taxes etc," Ramakrishna said.
However, brokers struck a note of disappointment on the hike in STT. "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.
With regard to STT, BSE MD and CEO Ashishkumar Chauhan said the minor increase on option premium from 0.017 per cent to 0.05 per cent is not expected to move the balance away from derivatives in India to the underlying equity market.
Welcoming the move to hike foreign holding in local stock bourse to 15 per cent from 5 per cent, it would help attractmore investments in India by creating stronger links with the best foreign exchanges," he noted.
Emkay Global Financial Services Managing Director Krishna Kumar Karwa said the increase of STT on options and dividend tax on above Rs 10 lakh receipts is disappointing.
Karwa, however, said from a capital markets perspective there is a huge sense of relief that status quo was maintained on long-term capital gains tax.
Karvy Private Wealth's Abhijit Bhave said the hike in STT on options by nearly three times is a "negative news for short-term option traders".
In his budget speech, Jaitley said transaction in foreign currency for sale of commodity derivatives taking place on a recognised association established in international financial services centre would not be liable to commodity transaction tax.
With regard to corporate bond market, various steps would be initiated, including introduction of an electronic auction platform by Sebi for primary debt offer to develop an enabling ecosystem for the private placement market in corporate bonds.
A complete information repository for corporate bonds, covering both primary and secondary market segments would be developed jointly by Reserve Bank of India (RBI) and Sebi.
Further, a framework for an electronic platform for repo market in corporate bonds would be developed by RBI.
Anand Rathi Financial Services Ltd chairman Anand Rathi said Budget has adopted a proactive approach. Immediate focus of the budget seems to be to support growth through consumption (particularly rural consumption), he added.
"Operationalising bank bureau board, capital infusion into PSU banks, amendment of policy related to Sarfesi and ARCs (Asset Reconstruction Companies), listing of general insurance companies are positive steps in the financial sector," said S Ravi, Practising chartered accountant and independent board member of various companies.