Global factors behind stock market decline, not LTCG tax: Economist

New Delhi:  The recent fall in the Indian stock market is not due to the Long-Term Capital Gains (LTCG) tax but because of global instability, economist and BJP national spokesperson Sanju Verma said on Wednesday.

In a conversation with IANS, Verma responded to remarks made by fund manager Samir Arora, who had suggested that the stock market decline was linked to LTCG tax.

“This is not true. The Indian market is falling due to global factors,” she contended, adding that the 12.5 per cent LTCG tax will only come into effect from April 2026 and it is non-discriminatory.

“The government has ensured that the LTCG tax rate remains uniform for retail investors, institutional investors, and foreign investors,” Verma stated.

The debate around the LTCG tax has gained momentum as some market watchers attributed the current downturn to high LTCG rates and urged the government to reconsider the current framework to reduce its impact.

Verma noted that the market declines are not limited to India. “Stock markets in Shanghai, Hong Kong, Japan, and Singapore are also witnessing a downturn.”

Before this correction, the Indian stock market had witnessed a strong rally. Nifty had crossed the 26,000 mark by September 2024, a sharp rise from 7,500 in March 2020. Similarly, Sensex surged from 25,600 in March 2020 to 86,000 in September 2024.

“The rise in markets over the past four and a half years – 249 per cent for the Nifty and 235 per cent for the Sensex – was extraordinary, and such a correction was to be expected,” she said.

The total market capitalisation of all companies listed on the Bombay Stock Exchange (BSE) has declined by Rs 95 lakh crore in recent months — this should be viewed in context, she mentioned.

“In 2013, the total market capitalisation of BSE-listed companies was Rs 93 lakh crore, which later increased to Rs 457 lakh crore,” Verma added.

She also pointed out the rapid growth in mutual funds over the last decade. The Assets Under Management (AUM) of mutual funds in India rose from Rs 8 lakh crore in 2013 to Rs 69 lakh crore in November 2024.

–IANS