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Below the Quote on Market by Krishna Appala, Sr. Research Analyst, Capitalmind Research

A few years ago, it would have been hard to believe that an increase in LTCG and STCG taxes would be dismissed by the market within one hour, with the week still ending on a positive note (up 1.5%). This resilience highlights the robust retail participation in the market. Following the recent budget, we anticipate this trend of strong retail engagement to continue and possibly increase. The recent budget has touched every asset class, from debt to gold, equities to real estate, in various ways. While the increase of LTCG tax to 12.5% and STCG tax to 20% is somewhat negative for the equity markets, the removal of indexation benefits for real estate and the existing taxation of debt mutual funds have notably affected investor sentiment. For real estate investors, the reduction of the LTCG tax rate to 12.5% from 20% is a mixed bag for investors. On one hand, the lower tax rate is beneficial as it reduces the immediate tax burden on capital gains. On the other hand, the removal of the indexation benefit is a significant drawback. Without indexation, investors cannot adjust the purchase price for inflation, which could lead to higher taxable gains and, thus, higher tax liabilities. On the debt side, we have approximately Rs 61 lakh crore invested in mutual funds (with debt mutual funds accounting for Rs 38 lakh crore and equity mutual funds for Rs 23 lakh crore). We expect some percentage of new incremental money to flow into equities as an asset class, and this trend is expected to continue for the next few years.”

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