Market Volatility Surges in April: Uncovering the Underlying Causes
Securities Transaction Tax Hits Index Futures and Options Volumes
The steep hike in securities transaction tax (STT) effective April 1 is beginning to take a toll on index futures and options volumes, according to analysts. The average daily turnover (ADT) of Nifty and Bank Nifty futures has plummeted 33% in the 16 trading sessions through April 24, compared to a similar period in March.
The decline in ADT is a significant 33% from ₹24,860 crore, which is a stark indication of the impact of the tax increase on market participants. This development is primarily attributed to the hike in STT, which has discouraged traders from engaging in futures and options contracts.
| Comparison of Average Daily Turnover (ADT) of Nifty and Bank Nifty Futures | | --- | --- | | March (similar period) | ₹36,800 crore | | April 1-24 (16 trading sessions) | ₹24,860 crore | | Percentage decline | 33% |
Investor Takeaway
Investors should be cautious of the impact of the STT hike on index futures and options volumes.
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