Traders and brokers are urging India's government to reconsider a recent hike in the securities transaction tax, according to IPO-bound National Stock Exchange (NSE). The move comes as market participants warn the increased levy could dent trading volumes and market liquidity ahead of the exchange's planned $3-4 billion public listing.

Industry groups argue the 0.1% tax increase on derivatives trades risks making India's $3.8 trillion stock market less competitive globally. The tax adjustment, implemented last month, applies to futures and options contracts that account for nearly 90% of NSE's transaction revenue. Market makers fear reduced activity could impact the exchange's IPO valuation.

NSE's listing, delayed since 2016, is seen as a bellwether for India's capital markets growth. Analysts suggest prolonged tax disputes might force institutional investors to reassess participation. Finance Ministry officials haven't indicated whether they'll review the policy, but sources confirm receiving multiple formal representations from market intermediaries.