Tax cuts for FIIs would be ‘asking govt to fund their under-performance’: Elara Capital MD & CEO

Dwindling stock market returns in Indian indices, especially for Foreign Institutional Investors (FIIs) should not determine tax policy changes, said Managing Director and CEO of Elara Capital Harendra Kumar.

Speaking to The Hindu on the sidelines of Elara’s annual conclave Ashwamedh, Mr. Kumar said that pushing for tax cuts for FIIs is “asking the government to fund their underperformance”.

“The FII amount is over the cost and rupee depreciation. They should make money post-tax. This problem was not there two years back, because they were making serious money,” he said further asking why they had not raised this two years back, when they were making returns. 

Further, he said that it is not even international investors, but hedge funds and high frequency traders that are complaining about the taxation in India. 

The Union government is gearing up to begin preparations the Union Budget for 2027-28 and stakeholders have started writing down their wishlists for the Ministry of Finance. One of them from market observers is the need to reduce STT or LTCG , which are taxes on the securities transactions and the capital gains on investments. 

The National President of ANMI, a stock brokers’ association, Kamlesh Shroff at a recent event urged the government to cut STT or abolish LTCG on equities to increase retail participation, adding the request along with other recommendations were already submitted to the Union Finance Ministry. 

Currently, STT is at 0.1% of the turnover at delivery and 0.025% for intraday trades. LTCG is charged at 12.5%  if the investment is held, longer than 12 months and the gains exceed ₹1.25 lakh. 

STT/LTCG cuts may not be necessary even for domestic investors, as the “long term capital gains were competitive,” said Mr.Kumar 

In the previous Union budget, STT was cut on options and futures transactions to discourage speculative behaviour using derivative instruments.

The long term growth for India is intact, he said, adding that water treatment, power and auto ancillary for EVs would be the dominant equity themes. These sectors would attract investments from FIIs and DIIs, and may push Nifty to 28,000 points in the next 15 months. 

As of September 2026, the calendar year continues to record the largest net outflow of foreign institutional investors (FII) of about ₹2.2 lakh crore, making this the second consecutive year of net outflow. To be sure, the benchmark Nifty 50 declined a little more than 2.5% in the past year. In the past two years, the index fell 7.1%.