High transaction cost is hurting prospects, feel stock brokers
There is a growing concern among stock brokers that cost of trading in securities has been high, causing an adverse impact on their prospects amid declining volumes on the bourses. According to brokers' estimates, a securities transaction worth Rs 1 lakh currently attracts a total cost of Rs 269, or 27 basis points.
This includes brokerage, stock exchange transaction charges, depository charges, Sebi turnover fees, securities transaction tax (STT) and stamp duty. Globally, total cost of transaction is estimated to be in the range of 9 basis points to 30 bps (100 basis points is 1%) of the traded value.
"With 27 bps, the trading costs are at the higher end of the range after China and Hong Kong, according to an IMF paper. However, none of these countries have statutory levies as high as in India, especially in the form of STT", said Ajit Sanghvi, a BSE member.
A few other brokers feel high transaction cost has reduced market depth and liquidity, increased volatility and made Indian markets less competitive than its global peers.
"Lower transaction costs for Indian products traded on the Singapore exchange is another bone of contention as volumes drift towards a foreign exchange without keeping Indian intermediaries in the loop" said a broker.
Varying stamp duties in different states has also been a cause of concern for brokers as they feel volumes are getting skewed towards certain states.
