Union Budget 2012-13: Broking firms's share jump on STT cut, tax sops

MUMBAI: Shares of select broking firms cheered the Finance Minister’s announcement to reduce in securities transaction tax and introduce tax sops for new equity investors, in the Union budget for FY 2013.

Industry analysts expected the move to bring in higher retail volumes.

Motilal Oswal Financial Services is trading 4% up at Rs 125, while JM Financial gained 2.77% and Geojit BNP Paribas is up 3.7% as on 1300 hours. These shares were trading almost up 7% soon after the minister’s announcement.

“We have been devising different strategies to attract retail customers, so definitely the budget is a positive for capital markets.,” said B Gopkumar, EVP and head – broking at Kotak Securities.

STT on delivery-based trades was reduced from 0.125% to 0.1%, though brokers expected a steeper cut. A new scheme was launched to provide tax benefits upto Rs 50,000 each to first-time investors in stocks.

Lesser STT on delivery trades could lead to more activity in equity trading, which earns higher brokerage yields than derivatives.

“Reduction in STT on delivery will hopefully encourage transactions in equity markets from futures and options,” he added.

Brokers have been facing falling broking incomes after volatile stock markets and high taxes kept away investments from retail clients. Many broking houses shut shop, while others diversified into lending and portfolio management services to ramp up income.