Officials are considering abolishing the long-term capital gains tax after overseas funds withdrew more than $30 billion so far this year, which followed a net $18.9 billion exit in 2025. This persistent selling has reduced foreign ownership of Indian equities to a record low of 14%. While market observers note that tax relief would match regional peers, foreign allocations face strong headwinds from a depreciating rupee, steep energy costs, and geopolitical strains with the United States.
Key points
Removing the capital gains tax is being weighed by the government to align the nation wit…: Removing the capital gains tax is being weighed by the government to align the nation with regional investment destinations.
A tax waiver alone may not restore inflows due to comparatively high equity valuations ag…: A tax waiver alone may not restore inflows due to comparatively high equity valuations against markets like South Korea and Taiwan.
Investor sentiment remains constrained by broader economic issues, including disappointin…: Investor sentiment remains constrained by broader economic issues, including disappointing corporate earnings, elevated energy prices, and currency depreciation.
Sources checked by our analysis pipeline: 1
Hello, this is Priyanka Salve, writing to you from Singapore.
Welcome to the latest edition of "Inside India" — your one-stop destination for stories and developments from the world's fastest-growing large economy.
Once a favorite emerging market for foreign investors, Indian equities have been losing their charm. Foreign holdings of Indian stocks are currently at an all-time low of 14%. Now a tax cut, which puts India on par with several Asian markets, is being proposed to win back these investors.
This week, I spoke with experts to find out whether a tax cut alone can restore the Indian stock market's appeal to foreign investors.
Any thoughts on today's newsletter? Share them with the team.
The big story
The clamor for removing tax on long-term capital gains, or LTCG, on foreign portfolio investors is rising in India as the country's equity markets witness record capital outflows.
On Monday, Reuters reported that India's capital market regulator has urged the government to scrap the LTCG tax for foreign investors.
One of India's oldest and most prominent industry bodies, PHD Chamber of Commerce…
Financial brokerages struggled to generate positive returns for festive portfolios as nearly two-thirds of their recommendations lost value over a twelve-month span. Although over half managed to outperform a declining Sensex, steep losses across individual equities highlighted the inherent risks of seasonal stock bundles. Consequently, analysts are advising investors to exercise caution rather than relying blindly on annual festival selections.
Mounting inflationary pressures driven by high energy and fuel prices linked to conflict involving Iran are prompting central bank officials to act. The policy shift aims to counter price growth that remains well above target after six consecutive meetings of holding rates steady. This adjustment will increase borrowing expenses across the economy while delivering relief to savers.
Market activity intensified substantially following significant interest and involvement from Goodman and Digital. The equity experienced an abrupt upward movement of forty-three percent during the trading period. This sharp rally reflects immediate investor reaction to the development concerning these entities.