India's finance chief gave markets something to cheer: Nirmala Sitharaman said "There's a lot of debate" about the levy on share trades, adding, "It's healthy to have this debate, and I will be keenly hearing them." She made the comments at the Bloomberg New Economy Forum in New Delhi while the country looks to attract more capital. She declined to get into details as work ramps up on the budget slated for February.
Traders keyed in on the possibility of discussion around the securities transaction tax, and the index gains built as she spoke. The Nifty 50 finished up 1.6% on Tuesday, the biggest advance in over two months. In a video segment, Sitharaman noted she would prefer to "tread cautiously" on tax matters so close to the budget and acknowledged an ongoing debate on both long-term capital gains tax and the STT.
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Nilesh Shah, who runs Kotak Mahindra Asset Management Co. as managing director, said the combination of STT and the capital gains levy is regarded as a "burden" for both local and foreign investors. "This dual taxation has been a concern for investors, and we need to find the right balance," he said. "I am glad that the honorable finance minister is listening to the market's suggestions, and I hope appropriate action will be taken soon."
Tuesday's pop was about possibility rather than policy. The takeaway for regular investors: tax debates around trading and long-term gains are alive, officials are listening, and markets are paying close attention to every hint about what could end up in February's budget.
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