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A stock brokers' association has asked the government to take a slew of measures, including lower transaction cost and withdrawal of long-term capital gains tax, for making equity investment more attractive, according to a release. The issues were raised by the Association of National Exchanges Members of India (ANMI) at a meeting of financial sector representatives chaired by Finance Minister Nirmala Sitharaman on Friday last week, the association said in a release.
"Due to the steep fall in markets in July the sentiment has turned acutely negative. This calls for urgent steps to boost investor sentiment specially for Indian investors. Long term capital gain tax and taxation on dividends in the hands of Indian investors should be withdrawn," it said. "We strongly believe that equity investment needs to be incentivized. We may not be in a position to give any fiscal incentives till the next budget. However, currently we feel that PSU banks, which need equity funds for recapitalisation, can raise funds from retail investors by offering them an appropriate discount." The cost of transaction in Indian exchanges was among the issues raised by the ANMI at the meeting, the release said.
As per an analysis by the World Bank, the turnover ratio of Indian stock market has fallen by 60 per cent from 143 in 2008 to 58 in 2018, it said. The turnover ratio which is a universally accepted parameter gauging trading volumes is the total value of shares traded in a specific period divided by the average market capitalisation of that period. This is largely on account of high government levies as stated earlier and huge margin requirements, it said. "While currently it may not be possible to make any change in government levies, the margin requirements should be made comparable to global benchmarks," ANMI said. On ease and safety of doing business, it said the compliance requirements for trading in stock exchanges has become quite cumbersome and requires a complete review. The faith of investors in market integrity and sanctity of market infrastructure is paramount. Margin money paid by thousands of investors is being jeopardized due to non-payment by a market participant, it noted. Another problem which will dent investor confidence is the restriction on off-market transactions proposed by the depositories from September 1 this year, it noted. ANMI represents around 900 members.