एडलवाइस ने प्रवाह को पुनर्जीवित करने, रुपये का समर्थन करने के लिए एफपीआई पूंजीगत लाभ कर को खत्म करने का आग्रह किया

Edelweiss Financial Services Chairman Rashesh Shah has called for the removal of long-term capital gains tax on foreign portfolio investors, joining a widening chorus of market participants urging the government to act as persistent overseas selling pressures Indian equities and the rupee.

What Happened

According to reports in Business Standard, Hindu BusinessLine, and LiveMint, Edelweiss Financial Services Chairman and Managing Director Rashesh Shah said scrapping capital gains tax for foreign portfolio investors (FPIs) could help revive inflows into Indian equities and support the rupee. The recommendation comes amid heavy overseas selling that has pressured domestic markets in recent sessions. Shah joins dozens of market voices pushing the government to exempt foreign portfolio investors from paying long-term capital gains tax on listed equities, a levy reintroduced in the 2018-19 Budget after a 13-year hiatus.

Why It Matters for India

The reintroduction of long-term capital gains tax (LTCG) at 10% on gains exceeding ₹1 lakh in 2018 was cited by several foreign funds as a deterrent to India allocations. Since then, FPI flows have turned volatile, with calendar year 2024 witnessing significant net selling in multiple months. The Edelweiss proposal targets a structural irritant: parity with domestic investors who also pay LTCG, but without the additional burden of treaty-based constraints and compliance overheads that foreign funds face. Removing the tax could improve India's relative attractiveness versus competing emerging markets such as Vietnam, Indonesia, and Saudi Arabia, which either exempt foreign investors or apply lower withholding rates. The rupee, which has hovered near record lows against the dollar, would benefit from renewed portfolio inflows that supplement the current account deficit financing.

Market Impact

NIFTY 50: A policy shift on FPI taxation would act as a positive sentiment catalyst, particularly for heavyweight financials and consumer names where foreign ownership is elevated. The index has struggled to sustain above 25,000 amid FPI selling; a tax reversal could unlock fresh allocations. BANKNIFTY: Banking stocks, which command the highest FPI ownership within the NIFTY, stand to gain disproportionately. Names such as HDFC Bank, ICICI Bank, and Kotak Mahindra Bank could see renewed buying interest. SENSEX: The 30-share benchmark, similarly weighted toward financials and IT, would mirror NIFTY's response. IT majors, while less dependent on FPI flows, benefit from rupee stability. Sectors in Focus: Financial services, capital goods, and consumption sectors with high foreign holding percentages would be primary beneficiaries. Defence and PSU stocks, driven more by domestic institutional flows, may see limited direct impact.

Historical Context

India abolished long-term capital gains tax on equities in 2004-05, ushering in a multi-year bull market fueled by foreign inflows. The tax was reintroduced in the 2018-19 Budget by then Finance Minister Arun Jaitley, citing revenue needs and equity with domestic investors. Post-reintroduction, FPI flows turned erratic: CY2018 saw net outflows of ₹80,000 crore, while CY2020-21 witnessed record inflows driven by global liquidity rather than tax policy. The current proposal echoes demands made by industry bodies such as ASIFMA and India-focused funds during pre-Budget consultations in 2023 and 2024, which the government did not act upon.

What to Watch

Investors should monitor: (1) Finance Ministry's response during the upcoming Winter Session of Parliament or in pre-Budget consultations for FY26; (2) FPI flow data from NSDL/CDSL for signs of acceleration or deceleration in selling; (3) Rupee trajectory against the dollar, particularly the 84.50-85.00 range; (4) Any mention in the RBI's monetary policy commentary on capital flow management; (5) Global risk appetite indicators — US payrolls, Fed rate path, and geopolitical developments in the Middle East — that could override domestic policy signals.

Disclaimer

AlgoIntra provides AI-generated technical data and market commentary, not investment advice. F&O trading involves extreme risk of capital loss.