Edelweiss urges India to drop capital gains tax for foreign investors

what happened

Rashesh Shah, chairman of Edelweiss Financial Services, says India should consider dropping the capital gains tax on foreign investors. He argues this could attract inflows and support the rupee. In an interview with Bloomberg Television, he said a growing group of voices is calling for exempting foreign portfolio investors from long-term tax on listed equity profits.

Finance Minister Nirmala Sitharaman said this week she will look at stock tax changes, but did not specify whether capital gains or transaction taxes are involved.

why it matters

According to Bloomberg data, foreign investors have pulled over $28 billion from India this year, but have put in more than $5 billion over the past three weeks, helping the market rebound nearly 10%. Shah named oil prices and global risk-off moves as the main risks. No decision has been made, so for markets this is more a signal than a change in conditions.

market impact

Indian equities and rupee: scrapping the tax could draw back foreign capital

• ▲Indian equities pressure up — scrapping the tax could bring foreign investors back to the market
• ▲Indian rupee pressure up — foreign capital inflows would support the currency

instruments