In his most recent GREED & fear report, Jefferies' Christopher Wood (Chris Wood) expressed some nervousness at the recent hike in the capital gains tax on stocks, despite the Indian stock market's remarkable resilience. Wood expressed his continued amazement that the recent increase in India's short- and long-term capital gains taxes did not have a greater detrimental effect on the stock market.
Mahesh Nandurkar, head of research at Jefferies in India, expressed his belief that another capital gains tax rise may occur during the present government's five-year term. "After all, in many Asian markets, investors, be they local or foreigners, face no capital gains at all," the speaker stated.
According to Wood, the number of people reporting short- and long-term capital gains grew four to five times between FY19 and FY23, indicating a rise in individual investor activity in the stock market. According to tax data, in FY23, 39 lakh people reported long-term capital gains and 47 lakh reported short-term capital gains. In FY19, 8 lakh reported long-term profits, while 11 lakh suggested short-term gains.
"GREED & dread are still shocked that the recent increase in India's short- and long-term capital gains taxes did not have a greater detrimental effect on the stock market, if this is evidence of the profits generated during the bull market. The GREED & fear's India long-only portfolio is down just 1.2% in US dollars since peaking on July 31, but the Nifty Index is still just 0.5% off its all-time high set on Monday," according to Jefferies.
The India branch of Jefferies predicted that capital gains will bring in around Rs 1.6 lakh crore this fiscal year, which ends on March 31, 2025, as opposed to an expected Rs 1.3 lakh crore in FY24.
Although the Indian stock market continues to show remarkable resilience, Wood acknowledged that GREED & fear are a little uneasy due to the recent hike in capital gains taxes.
According to Jefferies, Indian real estate equities still make up 19% of its India portfolio. It was reported that following a 22% YoY reduction in June, the volume of residential sales in the top seven cities fell by around 10% YoY in July.
"However, in the perspective of GREED & fear, it is far too soon to declare the cycle over, even though taking a break to refuel is normal and healthy. The BSE Realty Index, which is up 173% since late March 2023 but down 10% from its June peak, reflects this as well as real estate stocks," the report stated.
