Скачать или смотреть Union Budget 2026: Markets eye STT, LTCG tax rationalisation to boost FII inflows

Market participants are looking to the Union Budget for policy stability and targeted tax rationalisation to strengthen investor sentiment amid global uncertainties. Fund managers and market experts say measures to deepen the cash market and attract long-term foreign capital will be key focus areas.

One major demand is rationalisation of the Securities Transaction Tax (STT), particularly in the cash market, where higher transaction costs are seen as a deterrent compared to the derivatives segment. Experts say lowering STT could help improve participation and balance market activity.

Another expectation is relief on long-term capital gains (LTCG) tax to encourage stable foreign investment from pension and sovereign funds. Currently, equity investments held over one year attract LTCG tax above the exemption limit, and any change here could influence FII flows.

The push for reforms comes as foreign investors have been net sellers in Indian markets, with record outflows last year. Analysts believe even incremental tax and regulatory easing in the Budget could help boost capital inflows and reinforce India’s growth story.

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