Tax changes, policy support to sustain domestic equity inflows: JP Morgan
New Delhi, June 28
A series of tax and policy measures introduced in recent years has enhanced the attractiveness of equity investments in India, creating favourable conditions for sustained domestic inflows into the stock market despite relatively subdued returns over the past two years, according to a report by JP Morgan.
The global investment bank said recent changes in the taxation of long-term capital gains, debt mutual funds and insurance products have significantly improved the relative appeal of equities, further encouraging the shift of household savings toward financial assets.
JP Morgan noted that equities are currently subject to a 12.5 per cent long-term capital gains tax, while policy changes such as the removal of indexation benefits, taxation of certain insurance policy proceeds and slab-rate taxation for debt mutual funds have altered the risk-reward dynamics in favour of equity investments.
The brokerage said these tax and regulatory changes, combined with rising participation through Systematic Investment Plans (SIPs), are expected to continue supporting a steady flow of domestic money into equity markets.
According to the report, domestic investors have remained resilient even as foreign portfolio investors reduced their exposure to Indian equities during FY25 and FY26. Despite modest returns from benchmark indices during the period, retail investors continued to invest through SIPs, indicating a structural shift in investment behaviour rather than a response to short-term market movements.
JP Morgan said consistent participation by domestic investors has emerged as an important stabilising force for Indian equities, helping offset volatility arising from foreign fund outflows and periods of global risk aversion.
Separately, JPMorgan struck a cautious note on India's information technology sector, saying the industry is likely to face a prolonged period of weak growth as artificial intelligence-led disruption and geopolitical uncertainty continue to weigh on demand.
The brokerage said the sector is facing an uncertain demand environment due to an unprecedented combination of technology and business cycle headwinds, adding that a meaningful recovery in growth remains distant as enterprises continue to reassess their spending priorities.
— IANS
Reader Comments
Finally some global recognition! 🇮🇳 The removal of indexation benefits was a smart move—made debt funds less attractive and pushed people toward equities. But I worry about retail investors getting too exposed to market volatility. Need better financial literacy programs alongside these policy changes.
As someone who moved from the US to Bangalore for work, I'm impressed by how disciplined Indian retail investors are. SIP culture here puts American 401k contributions to shame in terms of consistency. The tax changes do make equities appealing, but I wish the govt would also incentivize long-term holding periods beyond just capital gains.
Respectful criticism: The tax changes are clever policy, but they also feel like forcing people into equities. Not everyone has the risk appetite for stocks, especially retirees. And that bit about IT sector being weak—true. AI is disrupting everything, and Indian IT firms need to innovate faster or get left behind. The days of easy outsourcing money are over.
My parents used to put everything in FDs and gold. Now even they've started SIPs! 🪙 The behavioral shift is real. But I'm cautious—when everyone piles into equities, valuations get stretched. Hope we don't see a bubble like 2008. That said, India's demographic dividend makes long-term equity investing a no-brainer. Jai Hind! 🇮🇳
The IT sector comment is spot on. I work in tech and clients are cutting budgets left and right because of AI uncertainty. The tax policy angle is interesting though—making equities more attractive is one thing, but we also need
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