Foreign investor sentiment towards India is under pressure, with taxation and returns emerging as key concerns. Veteran investors, including Akash Pra…
1/12The big question: India’s stock market has underperformed global peers, while foreign investor sentiment has come under pressure. Veteran investors have raised concerns about taxation, returns and India’s appeal as an investment destination. Is taxation one of the factors driving foreign investors away?
2/12Akash Prakash flags deteriorating sentiment: Veteran investor Akash Prakash has highlighted the deterioration in foreign investor sentiment towards India, pointing to declining foreign ownership of Indian equities and the country’s diminishing prominence in global investment discussions.
3/12Foreign ownership of Indian equities falls: Prakash has highlighted the decline in the value of Indian equities held by foreign investors. He argues that foreign ownership has fallen significantly and that India has become a consensus underweight for global investors.
4/12Akash Prakash points to capital gains tax: Prakash argues that India’s capital gains tax reduces the returns foreign investors can expect from long-term investments.
5/12Ajit Dayal says taxation hurts returns: Ajit Dayal of Quantum Advisors argues that India’s policies on capital gains taxation and currency depreciation can affect the returns expected by foreign portfolio investors and foreign direct investors.
6/12Vallabh Bhansali questions the tax: Vallabh Bhansali has argued that India should reconsider capital gains taxation for foreign institutional investors, particularly if competing markets offer more favourable tax treatment. He also cautions that changing tax policy alone cannot guarantee the return of foreign capital, as investors consider valuations, market trends and opportunities elsewhere.
7/12Nikhil Kamath calls for a level playing field: Nikhil Kamath has called for a review of taxation for foreign investors while arguing that domestic retail investors should not be disadvantaged by higher tax rates.
8/12Samir Arora wants LTCG tax scrapped for foreign investors: Samir Arora has long advocated scrapping long-term capital gains tax on equity investments by foreign investors. His argument is that India needs to remain competitive in attracting international capital.
9/12Finance Minister acknowledges the debate: Finance Minister Nirmala Sitharaman has acknowledged that investors, both in India and abroad, have been commenting on long-term capital gains taxation. Her remarks have drawn attention to the possibility of a review, but she has not announced any tax changes.
10/12Is tax relief on the cards?: Reports cited in the discussion suggest the government is considering possible tax relief for equity investments. A pre-budget announcement has not been ruled out, but no decision has been taken. A separate report by The Indian Express, as referenced in the discussion, said the government was examining a proposal to calculate capital gains for foreign investors based on dollar gains rather than gains measured against the rupee.
11/12What could a change in taxation mean?: A review of capital gains taxation could address one of the concerns raised by investors. However, foreign investment flows depend on several other factors, including market valuations, expected returns and investment opportunities in competing markets. Tax relief alone may not be enough to reverse the trend.
12/12The question facing policymakers: Will the government change the way equity investments are taxed? If so, will the relief be limited to foreign investors or extend to domestic investors as well? For now, the debate continues. The government’s next move could influence how investors assess India’s attractiveness, but the impact will depend on the measures eventually announced and the broader market environment.