Stock volumes crash in tax tangle

The proposed turnover tax kept day traders and arbitrageurs away from the stock markets, sending business volumes crashing by nearly 50 per ...

The proposed turnover tax kept day traders and arbitrageurs away from the stock markets, sending business volumes crashing by nearly 50 per cent over the last two days.

Market participants who play on wafer thin margins 8212; the aribtrageurs, jobbers and day traders that contribute over 70 per cent of the daily turnover 8212; collectively opposed the 0.15 transaction tax on all purchases proposed in the Union Budget.

These scattered players have proposed a new body, the Association of Stock Market Traders ASMT. About 2,000 appeared for the first meeting on Monday before it is officially constituted.

Both the National Stock Exchange NSE and the Bombay Stock Exchange BSE recorded low trading volumes and turnover ahead of finance minister P Chidambaram8217;s meeting with broking industry representatives on Tuesday.

The combined cash market volume on the bourses was at a one-year low of Rs 3,910 crore on Monday, as against Rs 9,292.47 crore on July 8 when the budget was announced. On Friday, the combined turnover of the BSE and NSE was at Rs 4,844.08 crore, when the Sensex nosedived 112 points as the Budget was announced during trading hours.

The number of shares traded on the NSE fell to 17.37 crore shares from 20.57 crore shares traded on Friday while BSE8217;s traded volume fell to 6.60 crore shares from the earlier level of 8.35 crore shares. But the benchmark Sensex remained steady 8212; down by a marginal loss of 0.94 points 8212; at 4,944.54 on Monday.

Turnover in the derivatives market also took a hit, as players chose to abstain from trading before clarity emerges on the issue. The NSE recorded a gross turnover of Rs 4,268.45 crore on Monday as against Rs 6,693.85 crore on Friday last.

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A jobber participating in Monday8217;s meeting at Birla Matushree Sabhaghar said, 8216;8216;If the FM does not roll back the proposed tax, we will completely stay away from the market.8217;8217;

Many players have decided stay away from the market on Monday as well as Tuesday to oppose the transaction tax.

Corporates glued to Rs 500 cr debt schemes

Corporates parked close to Rs 500 crore last week in liquid funds, despite the Budget proposal to raise dividend distribution tax to 20 pc from 12.5 pc. Lack of a low-tax, high-return alternative has continued to hold corporate interest, contrary to expectations that they will pull out money from schemes following Budget announcement. Firms like L038;T, ITC, Hero Honda put Rs 400-500 crore collectively in liquid schemes of top fund houses like UTI Mutual Fund, Prudential ICICI AMC, HDFC MF and Birla Sun Life AMC on July 8-9.