Potential LTCG cut could revive foreign flows
Jefferies said a possible cut in LTCG and STCG taxes could revive FPI flows and support the rupee. Foreign exits reached USD 110 billion since April 2025, while OI Charts data showed pressure in banking and energy stocks.
after close2 sources ↓machine-written, see hownot a recommendation
- ICICIBANK close
- ₹1,378
- On the day
- -0.67%
- Futures OI, long unwinding
- -1.1%
- Put-call ratio
- 0.84
- Max pain
- ₹1,400
A possible reduction in India’s long-term and short-term capital gains tax rates could encourage foreign portfolio investors to return to Indian equities and support the rupee, Jefferies said, according to reports by Devdiscourse and BusinessLine on 29 Oct 2026. No government decision has been announced. The discussions could involve an across-the-board tax cut, a targeted LTCG concession for FPIs, or allowing foreign investors to calculate gains in dollar terms to offset the impact of currency movements. 💼
Foreign exits reached USD 110 billion since April 2025 across foreign portfolio investors, foreign promoters and foreign private equity investors, making capital-account weakness a key source of pressure on the rupee. Jefferies’ analysis of 70 large emerging-market funds managing USD 380 billion found that India was underweight by 0.3 percentage points, against a 10-year average overweight position of 2.2 percentage points. The data indicate that foreign positioning remains relatively light, leaving large-cap equities and financials sensitive to any improvement in overseas flows. 📈
Key points:
• A tax reduction could lower the effective cost of returning capital to Indian equities, although the government would need to weigh revenue loss against fiscal constraints and its broader objective of converging taxation across asset classes.
• India abolished LTCG tax on listed equities in 2004, introduced a 10% STCG tax and securities transaction tax, and reintroduced LTCG tax in 2018. The current discussion therefore covers both a possible rate change and alternative relief for foreign investors.
• OI Charts data for 28 Oct 2026 showed a representative large private bank at ₹1,378, down 0.7% on the day and 1.4% over five sessions. Futures open interest fell 1.1%, indicating long unwinding; the put-call ratio was 0.84, with the ₹1,400 strike holding the largest call and put open interest and max pain also at ₹1,400.
• A large energy stock closed at ₹1,158, down 3.2% on the day and 5.0% over 20 sessions. Futures open interest rose 4.9%, indicating short build-up; the put-call ratio was 0.71, with call open interest concentrated at ₹1,200 and put open interest at ₹1,100. ⚡
The next market trigger is a formal government announcement, budget proposal or clarification on the scope of any tax change. Until then, the rupee, FPI flow data, foreign ownership trends and the ₹1,400 financial-sector options concentration will show whether expectations are translating into positioning.
Source: Devdiscourse and BusinessLine, 29 Oct 2026
Not investment advice. For informational purposes only.