Commodities may score over equity volumes

The removal of Commodities Transaction Tax (CTT) in the Budget 2009-10 may impact securities trade as investors may consider diverting focus to commodities market, SMC Capitals said in a report.

Taking a comparative view of trading volumes in commodities and stock markets, the report said that volume of  trading in commodities is on rise even otherwise over the last couple of years with a corresponding fall in volumes in equities.

While in 2007 equities accounted for 82 per cent trading and remaining 18 per cent came from commodities, in 2008, share of equities declined to 77 per cent. In the first five months of 2009, volume in equities was 63 per cent with commodities accounting for 37 per cent.

"The Budget proposal of abolishing CTT and continuing Securities Transaction Tax can have a huge impact with traders and arbitrageurs shifting their focus from equity to commodity markets," SMC Capitals equity head Jagannadham Thunuguntla said in the report.

Such a shift would lead to further increase in volumes in commodities at the cost of volumes in equities, the report observed.