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LTCG tax cut may lift sentiment, but unlikely to bring flood of foreign inflows, says UBS
CNBC-TV18 1 hr ago·3 Nov 2026, 10:14 am
UBS Global Research suggests that a recent cut in the Long-Term Capital Gains (LTCG) tax in India is unlikely to trigger a massive wave of foreign investment. While the move is a positive step for domestic investors, the firm notes that India's valuation premium over other emerging markets has narrowed. However, the country still trades at a significant premium compared to pre-pandemic levels.
For investors, this implies that while the tax cut may improve sentiment, it is not a silver bullet for attracting foreign capital. Global liquidity conditions remain the primary driver for flows, and India's earnings growth is currently only average for the emerging markets group. Consequently, a tax reduction alone may not be sufficient to reverse the trend of foreign outflows.
Investors should monitor upcoming corporate earnings reports and global interest rate trends. These factors will be more critical in determining the sustainability of market sentiment than the tax cut itself. The focus should remain on whether corporate profitability can justify the current high valuation of Indian stocks.
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