Eliminating the 12.5% long-term capital gains tax could raise an average foreign investor's annual dollar return by 2.2 percentage points, yet bull-case projections estimate this will draw merely $3 billion to $5 billion by FY28. Overseas investors have already removed roughly $64 billion from Indian equities since October 2024. Market observers point to historic patterns showing that Brent crude oil pricing above $105 per barrel acts as a primary catalyst for heavy overseas outflows. Consequently, tax policy revisions alone remain insufficient to neutralize the severe headwinds created by currency depreciation and global energy import costs.
Key points
India stands out from Asian peers by imposing listed equity gains taxes on foreign instit…: India stands out from Asian peers by imposing listed equity gains taxes on foreign institutional investors.
Calculating tax burdens in rupees creates phantom gains for foreign funds suffering net d…: Calculating tax burdens in rupees creates phantom gains for foreign funds suffering net dollar losses from currency depreciation.
Movements in Brent crude prices serve as a more immediate driver of overseas flows than a…: Movements in Brent crude prices serve as a more immediate driver of overseas flows than adjustments to capital gains taxation.
Sources checked by our analysis pipeline: 1
Analysts at JM Financial estimate that scrapping LTCG for FIIs investors could add $3–5 billion to FY28 inflows in its bull case, compared with the roughly $64 billion they have pulled from Indian equities since October 2024. The brokerage says the tax relief could lift an average foreign investor’s annual dollar return by 2.2 percentage points but cautions that it is a “second-order lever” alongside valuations and oil prices.
“Tax efficiency alone will not bring foreign capital back to India,” said Nirav Karkera, Head of Research and Funds Manager at W by Groww. “Ultimately, tax reform can remove a reason for investors to stay away, but it cannot create a reason to invest. That conviction will have to come from earnings delivery, reasonable valuations and confidence in the rupee.”
Earlier in the month, The Economic Times reported that the government has sought the views of investors, market functionaries and tax experts on LTCG and securities transaction tax (STT) as it begins a reassessment of capital market levies amid an exodus by overseas investors. On Monday, Reuters reported that Sebi has…
Market participants experienced sharp downward pressure during the session, which culminated in a retreat across the island's exchange. The widespread selling left equities firmly in negative territory by the time official activity concluded. This trajectory signaled significant headwinds for regional investors tracking broader market movements.
Investors are actively monitoring market activity as share prices record significant upward movement during the current trading session. This sudden buying momentum reflects changing market dynamics and renewed attention surrounding the company's financial performance. Market participants continue to watch closely to see if the equity's upward trajectory will be maintained.
Vastly underpenetrated domestic participation provides a durable runway for India's premier bourse to scale its core earnings over the long term. Entrenched trading liquidity across cash and derivative segments creates self-reinforcing competitive moats against potential market rivals. Consequently, sustained retail and institutional onboarding will drive outsized revenue expansion as financial asset adoption broadens nationwide.