INDIA: Equities Dip Following Announcement of Hike in Capital Gains Tax

An increase in long term capital gains tax by 2.5ppts (from 10% to 12.5%) is among the details of the budget which has hampered Indian equities. The Nifty and Sensex indices both sit around 0.9% lower at typing, extending the pullback from last week’s record highs.

• On Monday, the finance ministry said in its Economic Survey that the influx of millions of new retail investors since the pandemic calls for careful consideration as it could breed “overconfidence” and “speculative” behaviour.
• Yields on 10y local bonds initially dipped to their lowest level since April 2022 but have since settled back to near unchanged levels. USD/INR stands marginally higher but posted a fresh all-time high earlier today.
• Prime Minister Narendra Modi pledged INR 2trln ($23.9bn) to boost jobs and improve education in India, increased spending to his new allies, while also targeting a smaller fiscal deficit for this year. Finance Minister Sitharaman said the government will narrow the deficit to 4.9% of GDP in the current financial year, lower than her February projection of 5.1%.
• An overview of the budget can be found here.