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Nifty only index in top 15 to log negative returns

Market experts attribute the recent sell-off to changes in taxation for the uber-rich.

, ET Bureau|
Updated: Jul 25, 2019, 08.54 AM IST
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Since the ruling party’s return to power, which signaled continuation of reforms initiated in the first innings, India is the only market yielding negative returns in dollar terms.
The northward surge for Indian stock indices after Prime Minister Narendra Modi’s resounding poll victory in May appears to have stalled in July, pushing key local gauges to the bottom rung of the world’s top 15 equity markets by way of dollar returns.

Since the ruling party’s return to power, which signaled continuation of reforms initiated in the first innings, India is the only market yielding negative returns in dollar terms. The Nifty is down 2 per cent since late May while indices of the remaining 14 markets have given positive returns. Indices of competing emerging economies, such as China, Brazil, Russia, South Africa and Indonesia, are up in the range of 3 per cent to 18 per cent.

Stocks in the richer pockets — the US, the UK, Germany and Japan — are up 3 per cent to 8 per cent in the same period.

Market experts attribute the recent sell-off to changes in taxation for the uber-rich — federal budget provisions that affect overseas funds operating in the country as trusts or other non-corporate structures.

Nifty snip 25x

“A sudden change in the tax proposition of AOPs and trusts has forced them to wind up their investments in India, which they will bring back at a later date. However, collateral damage cannot be avoided when foreigners sell in panic and take money out of the country,” said Deven Choksey, managing director, K R Choksey.

The budget proposal imposing a higher surcharge on the super-rich also applies to capital gains made by foreign portfolio investors (FPIs) if they use the preferred trust route to invest in India. The proposal to raise the surcharge on categories of taxpayers with income above ?5 crore by 22 percentage points would mean that long-term capital gains tax on FPIs would effectively be 14.25 per cent against 12 per cent now, and shortterm gains would be taxed at 21.4 per cent (versus 17.9 per cent).

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