Bullish Signal: Calls to Abolish FPI LTCG Could Boost Indian Equities

Aditya Shah of Hercules Advisors has publicly urged the Indian government to completely remove the long-term capital gains tax on equities for foreign investors. This call comes amidst persistent FPI outflows, which have been a concern for the Indian market, impacting liquidity and valuations.

The removal of LTCG for FPIs would be a significant policy shift, making Indian equities more attractive compared to other emerging markets. This could lead to a substantial increase in foreign capital inflows, which are crucial for lowering the cost of capital for Indian companies and deepening the domestic financial markets.

While no specific stocks are named, a policy change like this would broadly benefit all Indian equities, particularly large-cap stocks that are typically favored by FPIs. Sectors like Financial Services (banks, NBFCs), IT, and Capital Goods, which often see significant FPI interest, could experience renewed buying pressure. Increased liquidity would also support broader market indices like Nifty and Sensex.

Traders should closely watch for any official statements or discussions from the Ministry of Finance or SEBI regarding potential tax reforms for FPIs. Any indication of a review or a move towards reducing/removing LTCG could be a strong bullish catalyst. Also, monitor FII/DII activity reports for early signs of changing sentiment.

• •Aditya Shah of Hercules Advisors calls for complete removal of LTCG for foreign investors.
• •He argues it deters crucial portfolio inflows.
• •Removing the tax is seen as the only credible signal to attract foreign capital.
• •Attracting foreign capital is vital for lowering the cost of capital and deepening markets.
• •Risk flag: Regulatory changes (e.g., USFDA actions)