Budget 2024: Tax On Trading Is Like Warnings On Cigarette Packs, Says CK Narayan

The increase in the trading costs due to a hike in the capital gains tax and securities transaction tax in the Union Budget 2024-25 will not deter investor sentiments as trading is like cigarette addiction, according to market veteran CK Narayan.

Budget 2024 has brought in the "most-feared item", which is the increase in trading costs through change in short and long-term capital gains and change in the STT, the founder of NeoTrader told NDTV Profit in an interview on Wednesday. "Will traders withdraw or reduce trades because the costs have increased? My opinion there is formally no."

Traders look at price action, entry and exit points, and not at taxes at the timing of initiation and closing of trades. The look at the taxes comes at the end of the quarter or year, according to Narayan.

Finance Minister Nirmala Sitharaman has proposed to hike the long-term capital gains tax from 10% to 12.5% and the short-term capital gains tax from 15% to 20%. The STT on options contracts will increase from 0.062% to 0.1% and the same for futures contracts will rise from 0.0125% to 0.02%.

With the need to increase the margin of profitability, traders and brokers will start focusing on the greater average-true-range stocks. The volume is not going to be affected after the announcement of the tax hikes.

"This (hike in tax) is like a warning on cigarette packs. It has been there for decades and nobody has stopped smoking," he said. "Trading is another addiction and people will engage in it no matter what."

Narayan said the Union government's view of sharing the profits with it was very clear and he does not see too many arguments that can be made against that. "People have been talking about it as though their entire careers have been destroyed."