Are taxes to blame for India's stock slump? Valuations tell a different story

what happened

The Sensex hit an all-time closing high of 85,836.12 points on September 26, 2024. Two years later, benchmark indices are down about 13%, and some individual stocks have fallen 50–60%. According to the TradingView article, six in ten BSE 500 stocks have posted no positive return since then.

Some market participants now blame taxes, pressing for relief on Securities Transaction Tax and long-term capital gains tax ahead of the Union Budget. The author disagrees, arguing that the Nifty 50 traded near 24 times earnings in 2024 and some stocks, such as Trent, above 220 times, leaving little room for disappointment.

why it matters

The author argues that tax cuts would not fix stretched valuations or guarantee higher corporate earnings. For investors, the piece highlights that foreign outflows of about $63 billion over the period reflect several forces, including US yields, a firmer dollar and global rotation.

market impact

Indian equities and FII flows: the tax debate may shape sentiment, while valuations and global rates remain the main drivers

instruments