Recalibration of tax regime may attract larger share of global capital

THE INDIAN CAPITAL market has been at the crossroads in recent times.

- SUNIL BADALA

On one hand, we have the red-hot IPO market with record subscriptions and strong listings.In contrast, the secondary market has seen muted action and interest from the foreign investors in last eighteen months or so.

It will be worthwhile to look at the investment environment for Foreign Portfolio Investors (FPIs) in the recent past such as India’s GDP growth has still been strong, clocking 8.2% in Q2 of current fiscal. Last few quarters average earnings growth has been muted - evidenced by single digit growth rate; tariffs levied on Indian exports in the US by the Trump administration (among the highest in the world); rupee has seen continued depreciation against most major currencies in the recent past.

This has resulted in lower returns for the investors (post conversion); companies continue to be richly valued - as compared to foreign markets. the absence of newage companies in AI, chips, cloud computing space — a space which has garnered maximum investments globally.

Taxation on gains

Another critical factor influencing FPI sentiment is the taxation of capital gains on listed equities. Over the past decade and a half, the tax burden has increased multiple times, primarily as a revenue-generation measure.