Capital gains tax, STT hikes hurt FPI sentiment, says Nithin Kamath
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Foreign investor interest in Indian equities may be showing signs of cooling, according to recent remarks by Nithin Kamath, who cited growing caution among global investors.
In a post on social media, Kamath said feedback from industry participants suggests that overseas investors are turning increasingly wary of India as an investment destination.
Is tax regime dampening FPI sentiment
Kamath also pointed to structural factors such as India’s long-term and short-term capital gains (LTCG/STCG) tax framework, along with the recent increase in securities transaction tax (STT), as dampeners for foreign portfolio investor (FPI) sentiment.
“If we need to attract FPIs back, and we do, fixing this feels like pretty low-hanging fruit,” he noted.
Kamath’s concerns
He highlighted several concerns, including India’s perceived geopolitical exposure, particularly to potential oil shocks, along with a lack of meaningful artificial intelligence (AI)-linked investment opportunities, elevated valuations, and pressure on the rupee.
“Interest has pretty much died out. India is seen as geopolitically exposed, especially to an oil shock. There are no real AI plays. Valuations are rich. And the rupee situation doesn't help,” Kamath said.
He said that several investors who were sitting on gains have started booking profits and are redirecting capital to other markets such as Japan, Taiwan, South Korea and parts of Europe.
As per report, FII outflows have intensified market pressure, with foreign investors withdrawing ₹1.62 lakh crore since the onset of the conflict and a total of ₹2.1 lakh crore so far in CY26.
Meanwhile, on Friday, benchmark indices traded higher, with the Sensex rising 0.87% or 663.30 points to 77,294.95, and the Nifty50 gaining 1.01% or 240.45 points to 24,015.55. Asian Paints, Shriram Finance, Eicher Motors and ICICI Bank were among the top gainers on the Nifty50. In the broader market, the Nifty MidCap and Nifty SmallCap indices advanced 0.97% and 1.6%, respectively.