STT, capital gains tweaks rattle investors despite growth push: Sunil Singhania

Indian equity markets saw a sharp reaction following the Union Budget, with the Nifty slipping on a low-volume Sunday session. While headline numbers triggered disappointment, market veteran Sunil Singhania said a closer look at the Budget reveals meaningful positives for long-term growth — even as recurring tax changes continue to unsettle investors.

Responding to ET Now on what weighed on sentiment, Singhania acknowledged the initial disappointment but highlighted increased allocations to key sectors.

“Obviously, on the face of it, there is disappointment for capital markets, but as we go through the fine prints, the outlay for railways, defence and infrastructure seems to have increased and that is one reason why the markets have bounced back. The only one thing which is a little disappointing is this tweaking of STT rates and capital gains tax rates every year, that unnecessarily causes irritants,” he said.

Singhania added that while discouraging speculation makes policy sense, frequent changes reduce predictability.

“Yes, it makes sense to discourage people to speculate, but we have to just put our thoughts together and say this is what we are going to do and now this is going to sustain for the next three-four years,” he said.

He also pointed out that the buyback tax change has come as a marginal positive but stressed the need for a stronger push to support India’s long-term growth ambitions.

“If we have to go from 4 to 8 trillion, 10 trillion dollars, particularly in a scenario where the world is so volatile, there are so many headwinds, multiple wars and this tariff thing hanging on, we need a very-very conscious push,” Singhania said.

Market Dips Not a Tactical Trigger
On whether the day’s decline presents a buying opportunity, Singhania cautioned against reacting to short-term volatility.

“If you are positive on India from a three-five years perspective, then every day is an opportunity. Just because the markets have fallen 1-2% today does not make it more attractive or less attractive,” he said.

He advised investors to focus on asset allocation rather than chasing short-term dips.

“Read through the fine prints, see your asset allocation, see if you have already got equity exposure, stick to it. Do not jump in just because some stocks have fallen 2-5%,” he added.

Foreign Outflows and Policy Stability Key
With over $22 billion in foreign outflows, concerns remain on whether the budget can revive foreign portfolio investor (FPI) interest. Singhania underlined the growing burden on capital markets and the importance of long-term policy clarity.

“There is always a last straw on the camel’s back. We cannot bear more burden as far as capital markets are concerned. We can say all the good things on TV, but we have to be realistic and say that capital markets are very important for taking the economy to 4 to 8 to 10 trillion,” he said.

He stressed that India’s private sector growth and large-scale investments have been made possible due to strong equity and fixed income markets.

“It is okay to make money at some point of time. You just cannot say that these participants are making more money so tax them more. Going forward, you announce that for the next three years we will not tweak anything and then life can be more predictable,” Singhania said.

Banking Sector Remains a Bright Spot
On banking and financial services, Singhania struck a positive note, citing improved asset quality and operational efficiency.

“Banking as a sector has come much ahead. NPAs are in control. Systems, processes and efficiency have gone up tremendously. Even PSU banks have net NPAs of half a percent or lower, which is like music to the ears,” he said.

He credited the government for reduced interference in bank functioning and said the sector is structurally stronger.

However, he reiterated that stable tax and policy frameworks are critical to restoring confidence, especially in a year marked by heavy foreign outflows.

“If participants are clear about taxation from a three-five years perspective, then planning becomes much easier. These wild swings, particularly in equity markets, do not infuse confidence,” he said.

Singhania added that reviving foreign flows would help stabilise the rupee, lower yields further and support capital formation — a key requirement for India’s next phase of economic expansion.

“Ultimately, foreign flows come, the rupee will be stable. Yields can move back to 6.3-6.4% and it would help all constituents including bond markets, banks and capital formation, which is the need of the hour to take the economy to 8 to 10 trillion dollars,” he said.