STT Hike Risks Market Liquidity, FPI Appeal: Rajesh Baheti Warns
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CNBC TV18•02-02-2026, 12:37
STT Hike Risks Market Liquidity, FPI Appeal: Rajesh Baheti Warns
- •Rajesh Baheti, MD of Crosseas Capital Services, warns that the sharp hike in Securities Transaction Tax (STT) on futures and options could severely impact high-frequency and arbitrage traders.
- •These professional traders are crucial for market depth and efficiency; their reduced participation due to higher STT could lead to a significant drop in market liquidity.
- •Weakened liquidity poses a serious concern for Foreign Portfolio Investors (FPIs), potentially making Indian markets less attractive for capital deployment.
- •Baheti suggests the government is testing market resilience, but repeated cost increases could eventually make trading unviable for some participants, especially given the options-heavy derivatives market.
- •He argues that the STT hike is unlikely to deter retail speculation but will instead lead to wider market spreads, hurting both retail traders and overall market appeal for foreign investors.
Why It Matters: The STT hike on F&O could damage market liquidity, deter FPIs, and make trading unviable for key participants.
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