Mumbai: Indian stocks rallied on Tuesday, with the Nifty 50 posting its biggest gain in over two months, after finance minister Nirmala Sitharaman said the government would hear investors’ views on capital gains taxation. Her remarks lifted sentiment in a market battered by sustained foreign selling, though no policy change was signalled.The Nifty 50 rose 1.6% to close at 22,721.95 on Tuesday, its biggest single-day percentage gain since 3 August. The Sensex gained 1.5% to settle at 73,033.78, marking its strongest rise since 15 April. The rally came after the Nifty fell in eight of the previous nine weeks, as sustained foreign investor selling weighed on sentiment.
Speaking at the Bloomberg New Economy Forum in New Delhi on Tuesday, Sitharaman said Indian and foreign investors had raised questions about long-term capital gains (LTCG) tax, the securities transaction tax (STT) and whether different asset classes should be taxed on a similar footing, according to media reports.
“The finance minister’s comments have certainly brought some cheer to the market,” said Feroze Azeez, joint CEO of Anand Rathi Wealth. While she had not indicated any decision on LTCG or STT, the government’s willingness to hear industry views was encouraging, he said.
Taxation is an important consideration for foreign investors, particularly when competing Asian markets do not levy capital gains tax on equity investments. Any rationalisation could improve India’s attractiveness and encourage greater long-term foreign participation, Azeez added.
The Nifty has fallen about 13% this calendar year, putting it on track for its first annual decline in 11 years, as foreign investors sold $32 billion worth of Indian equities. Foreign portfolio investors (FPIs) were net sellers of ₹1,305 crore on Tuesday, while domestic institutional investors (DIIs) were net buyers of ₹2,439 crore, according to provisional BSE data.