A cut in long-term capital gains (LTCG) tax is unlikely to revive foreign inflows into Indian equities on its own, Bernstein has said. The brokerage also sees limited benefit for India from any near-term pause in the global artificial intelligence (AI) trade.
Bernstein said a recovery in India’s growth and earnings cycle remains critical. Without that, tax relief may support sentiment only briefly.
“A sharp 1–2 day market rally that a cut would trigger may actually be used to offload positions,” said Venugopal Garre, managing director at Bernstein.
Bernstein said an LTCG cut would be desirable for a capital-starved economy. It could also improve after-tax returns for long-term investors.
But the brokerage does not expect it to trigger sustained foreign institutional investor (FII) inflows by itself. Foreign flows into India have historically depended more on growth, earnings momentum and currency stability than on tax rates alone.