Tax Reforms Boost Equity Investments, JP Morgan Says Domestic Inflows To Remain Strong Despite Muted Market Returns
JP Morgan says recent tax and policy changes have made equity investments more attractive than other financial products. Strong SIP investments and rising retail participation are expected to keep domestic money flowing into stock markets, even as foreign investors remain cautious and the IT sector faces growth challenges.
JP Morgan says recent tax and policy changes have made equity investments more attractive than other financial products. |
New Delhi: Recent tax and policy changes have made investing in the stock market more attractive for Indian households, according to a report by JP Morgan. The global investment bank believes these measures will help maintain strong domestic investment in equities despite modest market returns over the past two years.
Tax changes favour equity investments
JP Morgan said several government decisions have improved the appeal of equities compared to other investment options. Long-term capital gains on equities are taxed at 12.5 percent, while recent changes have made debt mutual funds and some insurance products less tax-efficient.
The removal of indexation benefits for certain investments and taxation of some insurance policy proceeds have also shifted the balance in favour of stock market investments.
SIPs continue to attract investors
The report said Systematic Investment Plans (SIPs) remain a major source of steady inflows into equity markets. Retail investors have continued investing regularly even when benchmark indices delivered limited returns.
According to JP Morgan, this shows that Indian investors are increasingly following a disciplined, long-term investment approach instead of reacting to short-term market movements.
Domestic investors support the market
The brokerage noted that domestic investors have played a key role in supporting Indian equity markets during FY25 and FY26. Their continued investments helped reduce the impact of foreign portfolio investors selling Indian shares.
JP Morgan said strong domestic participation has become an important stabilising factor, helping markets handle periods of global uncertainty and foreign fund outflows.
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Cautious outlook for IT sector
While remaining positive on domestic equity flows, JP Morgan expressed caution about India's information technology sector. It said the industry could face a longer period of slow growth due to artificial intelligence-led disruption and geopolitical uncertainty.
The report added that many companies are reviewing their technology spending, making a strong recovery in IT demand unlikely in the near future.
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