“No expectations,” Arora said, adding that the government may consider small changes to long-term capital gains tax for a limited set of foreign investors, but this is unlikely to affect markets in a broad way.
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He argued that foreign portfolio investors should not be taxed in India and should instead pay tax in their home countries, similar to how Indian investors are taxed abroad. However, he said changing the system now would be difficult after rates were increased last year.
Arora said reducing capital gains tax for all investors, even temporarily, could help improve sentiment and lift post-tax returns. “Market will go up 4–5%” if such a cut is announced, he said, explaining that lower taxes directly improve investor returns.
He expects market sentiment to improve gradually through earnings growth and global trade developments over the next six to nine months.
Arora said recent price corrections are often explained using valuation arguments, even though similar valuation levels existed in previous years when markets were rising. He said investors tend to create explanations after prices move, rather than before.
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Arora also pointed to currency weakness as a concern for foreign investors, noting that portfolio outflows affect the rupee and reduce returns for overseas investors even when stock prices are stable.
He said aligning tax treatment across investors could help offset currency-related losses, but added that any major tax changes are unlikely in the current Budget.
For the full interview, watch the accompanying video
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