Capital gains tax: Why Chris Wood is nervous despite Indian stock market's resilience
Jefferies’ India office projected capital gains to generate about Rs 1.6 lakh crore in revenue this fiscal year ending March 31, 2025, up from an estimated Rs 1.3 lakh crore in FY24.
- Sep 6, 2024,
- Updated Sep 6, 2024 2:44 PM IST
Christopher Wood (Chris Wood) of Jefferies in his latest GREED & fear report said the recent increase in capital gains tax on equities has made him somewhat nervous, even as the Indian stock market remains impressively resilient. Wood said he remains astonished that the recent rise in both short- and long-term capital gains tax in India did not have more of a negative impact on the stock market.
"After all, in many Asian markets, investors, be they local or foreigners, face no capital gains at all," he said adding that Jefferies’ head of India research, Mahesh Nandurkar, believes that another capital gains tax hike could happen in the context of the current government’s five-year term.
Wood noted said an increased participation of individual investors in the stock market is reflected in the four- to five-fold increase in the number of individuals reporting short- and long-term capital gains in the period between FY19 and FY23. Tax data shows that there were 39 lakh individuals reporting long-term capital gains and 47 lakh reporting short-term capital gains in FY23. This is against 8 lakh reporting long term and 11 lakh suggesting short-term gains in FY19.
"If this is a testament to the gains made in India’s bull market, GREED & fear remains astonished that the recent rise in both short- and long-term capital gains tax in India did not have more of a negative impact on the stock market. The Nifty Index remains only 0.5 per cent below its all-time high reached on Monday while GREED & fear’s India long-only portfolio is down only 1.2 per cent in US dollar terms since peaking on 31 July," Jefferies said.
Jefferies’ India office projected capital gains to generate about Rs 1.6 lakh crore in revenue this fiscal year ending March 31, 2025, up from an estimated Rs 1.3 lakh crore in FY24.
"While the Indian stock market remains impressively resilient, it has to be admitted that the increase in capital gains taxes makes GREED & fear somewhat nervous, Wood said.
Jefferies said its India portfolio still has a 19 per cent weighting in Indian property stocks. It noted that eesidential sales volume in the top seven cities declined by about 10 per cent YoY in July after a 22 per cent YoY fall in June.
"Still, in GREED & fear’s view, it is way too premature to call an end to the cycle, though a pause to refresh is both healthy and to be expected. The same applies to the property stocks, with the BSE Realty Index down 10% from its June high but up by 173% since late March 2023,' it said.
Christopher Wood (Chris Wood) of Jefferies in his latest GREED & fear report said the recent increase in capital gains tax on equities has made him somewhat nervous, even as the Indian stock market remains impressively resilient. Wood said he remains astonished that the recent rise in both short- and long-term capital gains tax in India did not have more of a negative impact on the stock market.
"After all, in many Asian markets, investors, be they local or foreigners, face no capital gains at all," he said adding that Jefferies’ head of India research, Mahesh Nandurkar, believes that another capital gains tax hike could happen in the context of the current government’s five-year term.
Wood noted said an increased participation of individual investors in the stock market is reflected in the four- to five-fold increase in the number of individuals reporting short- and long-term capital gains in the period between FY19 and FY23. Tax data shows that there were 39 lakh individuals reporting long-term capital gains and 47 lakh reporting short-term capital gains in FY23. This is against 8 lakh reporting long term and 11 lakh suggesting short-term gains in FY19.
"If this is a testament to the gains made in India’s bull market, GREED & fear remains astonished that the recent rise in both short- and long-term capital gains tax in India did not have more of a negative impact on the stock market. The Nifty Index remains only 0.5 per cent below its all-time high reached on Monday while GREED & fear’s India long-only portfolio is down only 1.2 per cent in US dollar terms since peaking on 31 July," Jefferies said.
Jefferies’ India office projected capital gains to generate about Rs 1.6 lakh crore in revenue this fiscal year ending March 31, 2025, up from an estimated Rs 1.3 lakh crore in FY24.
"While the Indian stock market remains impressively resilient, it has to be admitted that the increase in capital gains taxes makes GREED & fear somewhat nervous, Wood said.
Jefferies said its India portfolio still has a 19 per cent weighting in Indian property stocks. It noted that eesidential sales volume in the top seven cities declined by about 10 per cent YoY in July after a 22 per cent YoY fall in June.
"Still, in GREED & fear’s view, it is way too premature to call an end to the cycle, though a pause to refresh is both healthy and to be expected. The same applies to the property stocks, with the BSE Realty Index down 10% from its June high but up by 173% since late March 2023,' it said.