In a recent discussion, renowned investor Samir Arora, Founder and Chief Investment Officer of Helios Capital, strongly opposed the idea of levying long-term capital gains (LTCG) tax on investors in India. He called it the government’s “biggest mistake,” particularly for foreign investors, and warned that such a policy could have long-term negative consequences on the Indian stock market.
Why is LTCG Tax a Concern?
Long-term capital gains tax is levied on profits earned from the sale of financial assets held for over a year. While intended to generate revenue for the government, Arora believes that imposing or increasing LTCG tax will deter foreign institutional investors (FIIs) and impact overall market sentiment.
Over the past six months, FIIs have sold off Indian equities worth over ₹1 trillion, highlighting a strong outflow of foreign investments. Meanwhile, domestic mutual funds have remained buyers, infusing around ₹2.2 trillion during the same period. However, this balance might not sustain if policy changes make India less attractive for global investors.
Market Impact and Economic Outlook
Arora emphasized that the Indian stock market has remained volatile, with several global and domestic economic uncertainties playing a role. Factors like:
High interest rates in the US
Global economic slowdowns
Indian government taxation policies
have influenced investor confidence.
For younger investors, market dips can be an opportunity to buy at lower prices. However, retirees or those nearing financial goals may find it difficult to navigate unpredictable market fluctuations.
Will the Market Recover?
Arora predicted that 2025 might not be a profitable year for stock market investors. Instead of generating high returns, the primary focus should be on capital preservation. A strong market recovery requires policy stability, a favorable investment climate, and clear signals from the government.
According to Samir Arora, if the government wants a V-shaped recovery, it must respect markets and foreign investors' confidence. Any move to increase or sustain long-term capital gains tax may lead to further outflows from Indian equities. While long-term investors can withstand market cycles, the short-term impact could be a dampened investment climate.
Disclaimer:
The views expressed in this article are based on Samir Arora’s statements and market analysis. This content is for informational purposes only and should not be considered financial or investment advice. Investors are advised to conduct their research and consult financial experts before making investment decisions.
