India's resilience despite capital gains tax surprised Jefferies, Chris Wood says another hike on cards

Is still way too premature to call an end to the real-estate cycle, said Jefferies.

Indian market's resilience to the increase in capital gains tax has surprised many market participants, including Chris Wood of Jefferies, who shared his astonishment in the latest edition of Greed and Fear note, on September 6, admitting that he was expecting somewhat negative impact.

Another hike in capital gains could be on the card, the Jefferies note said, adding that the increase contributes to higher nervousness, especially since investors in many other Asian economies face no capital gains tax at all.

Equities now attract a long-term capital gains tax (LTCG) of 12.5 percent, up from from 10 percent, while short-term capital gains tax (STCG) would be 20 percent, up from 15 percent earlier, as announced by Finance Minister Nirmala Sitharaman in the Union Budget in July.

As a result of the changing capital gains tax structure, it is still way too premature to call an end to the real estate cycle, though a pause to refresh is both healthy and to be expected.

Also Read | Hike in capital gains tax only a temporary concern, say MF players

The government’s decision to hike tax on both, long-term capital gains and short-term capital gains had taken the mutual fund industry by surprise, though participants are unanimous that this is will not have any serious impact on the sentiment.

Venkat Chalasani, Chief Executive, Association of Mutual Funds too sounded confident that the tax hike will not deter investors. “While the changes in rates for Long Term Capital Gain and Short Term Capital Gain were not anticipated, the markets will take them in their stride," Chalasani had said.

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