Key Trends in the Indian Stock Market for November 2024

BSE and NSE Update Transaction Fees Amid Regulatory Changes

The BSE and NSE have revised transaction fees for cash and futures and options trading, effective October 1, following a mandate from SEBI for a uniform fee structure.

BSE now charges ₹3,250 per crore for Sensex and Bankex options contracts, while fees for other equity derivatives remain unchanged. For Sensex 50 options and stock options, the fee is ₹500 per crore, with no charge for index and stock futures.

On the NSE, the transaction fee for the cash market is set at ₹2.97 per lakh of traded value. For equity futures, the fee is ₹1.73 per lakh, and for equity options, it is ₹35.03 per lakh of premium value.

Increase in Securities Transaction Tax (STT) on F&O Trading

The Finance Minister announced an increase in the securities transaction tax on Futures & Options trading, effective October 1. The STT for futures trading will rise to 0.02% from the previous 0.0125%, while options trading will be taxed at 0.1%. This hike aims to discourage the recent surge in retail derivative trading, potentially impacting market volumes and the revenues of exchanges and SEBI..

New Taxation on Share Buybacks

The Finance Minister announced that income from share buybacks will be taxed as dividends in the hands of shareholders, effective October 1. This change aligns the tax treatment with applicable income tax slabs. Share buybacks, where companies repurchase their own shares, are typically seen as a tax-efficient way to return cash to investors. The new rules aim to transfer the tax burden from companies to shareholders, allowing firms to utilise the funds for other purposes.

Record FPI Outflows from Indian Equities

In October, foreign portfolio investors (FPIs) recorded substantial outflows from Indian equities, amounting to ₹82,479 crore, driven by concerns over high valuations and geopolitical tensions. This trend marks a notable shift, with FPIs significantly selling off their holdings in response to market conditions. Despite these outflows, domestic institutional investor support has helped contain the market’s decline. Following the US Federal Reserve’s recent rate hike, FPIs have begun shifting their investments towards Chinese stocks, attracted by measures from Beijing aimed at stabilising its troubled property and capital markets.

RBI Maintains Steady Repo Rate Amid Economic Stability

On October 9, 2024, the RBI’s Monetary Policy Committee decided to keep the repo rate unchanged at 6.50% for the tenth consecutive meeting. Projections indicate GDP growth at 7.2% and CPI inflation at 4.5%. The central bank shifted to a “neutral” stance, anticipating improved food inflation while ensuring core inflation remains stable. Additionally, the RBI expressed confidence in meeting external financing needs.

Conclusion

October 2024 sees the Indian stock market influenced by key regulatory changes and economic trends. Increased transaction fees and taxation on share buybacks create a complex landscape for investors. Substantial FPI outflows reflect valuation concerns, but strong domestic support helps stabilise the market. The RBI’s steady repo rate signals cautious optimism for future growth.