Arvin

India's cash market has a liquidity problem. And STT is a big part of it. I ran a simple number-crunch this week: how many times does a country's tradable stock float actually change hands? Method: Market cap × free float % = free float value Average daily cash turnover ÷ free float value = daily turnover velocity The results: 🇮🇳 India: ₹474 lakh cr market cap, ~50% free float, ₹1.13 lakh cr daily cash turnover → 0.48% of free float trades per day. About 1.2x a year. 🇺🇸 US: $75 trn market cap, ~90% float, $1.1 trn daily → ~1.6% per day. About 4x a year. 🇨🇳 China: ¥117 trn market cap, ~65% float, ¥2.7 trn daily → ~3.6% per day. About 9x a year. China's float turns over 7–8x faster than ours. The US turns over 3–4x faster. Why it matters: Low turnover means thin order books, wider spreads, higher impact cost, and weaker price discovery, especially outside the top 200 stocks. A large investor can't enter or exit without moving the price. That's a microstructure problem, not just a volume problem. The cost gap: A delivery trade in India pays 0.1% STT on each side, so 0.2% per round trip before brokerage and other charges. China charges 0.05% stamp duty, on the sell side only. The US has no transaction tax, only a negligible regulatory fee. In fact US allows darkpools. When the friction is 4x China's and near-infinite versus the US, capital does the rational thing. It avoids the cash market and moves to F&O, where the tax per rupee of exposure is lower. We've built a tax structure that pushes speculation into derivatives and starves the cash market of depth. Deep cash markets make healthy capital markets. If we want India to be a $10 trn market, liquidity in the underlying has to be priced right. Time to rethink STT. #StockMarket #India #STT #MarketMicrostructure #Liquidity