Capital gains tax in India is a bad idea: Samir Arora, Helios Capital

Levying capital gains tax on those who invest in India, especially the foreign investors, is a bad idea, and is possibly the Central government's "biggest mistake," said Samir Arora, founder and chief investment officer of Helios Capital at the Business Standard Manthan Summit 2025.

Capital gains tax, he added, is especially souring sentiment for foreign investors who have been on an unabated selling spree for five months. In the last couple of months alone, foreign institutional investors (FIIs) have dumped Indian equities worth over Rs 1 trillion.

“The biggest mistake they (the government) have made, the biggest souring of sentiment, and reality which they have to accept is capital gains tax in India, particularly the foreign investors, is 100 per cent wrong,” Arora said.

Adding: “The largest investors in the world and in India are Foreign Sovereign Funds, Pension Funds, Universities, and the High Net worth Individuals (HNIs).

Taxing them on their gains, especially when they have no tax set-off available in their home country and when they face forex-related risks, is a big mistake that the government is making.”

Arora, who has been investing in the markets for over three decades, said India collected around $10-11 billion dollars as capital gains tax in 2022-23 (FY23).

“India, however, should waive the capital gains tax to respect the markets and foreign investors,” he said.

As regards fundamentals, Arora believes that the corporate earnings growth, excluding commodities, back home was around 13 per cent, which is not as bad as perceived by the markets. The recent market fall, he said, has not only been due to a reaction to corporate earnings growth, but a mix of other global and domestic issues.

Young turks

The fall in the markets, Arora believes, is good for those who are young and have just begun investing as they have seen such a phase right at the start. They should hope that the markets should be cheap when they begin their investing journey so that they can buy more and stay put for long.

“Now, they can buy more units / shares and stay put for long. On the contrary, those who were nearing retirement and wanted to withdraw have been hit hard as their withdrawable corpus has shrunk,” he said.

Though it is always difficult to predict when the markets will bottom out, Arora believes typically markets tend to bottom out after eight – nine months and then enter a consolidation phase for the next three – four months before staging a recovery.

“We are in a period of high uncertainty. That said, we are in the end game somewhere. In the next few months, a few things should coincide. By April / May, (time-wise) it would be around eight months since the fall started, which is equivalent to the time period of the fall / correction seen earlier. Also, by then there would be some clarity regarding the Trump-related tariff negotiations and how the corporate earnings will play out in the year ahead,” Arora said.

From an overall perspective, the first six months of calendar year 2025 (CY25), Arora said, will be about capital preservation for investors. As a strategy, Arora is sitting on the sidelines for now.

“The shopping basket has been deferred indefinitely. I want to buy but not right now, as there is too much uncertainty,” Arora said.

His boldest investment bet in the last 12 – 18 months has been Zomato, while the missed opportunity has been shorting high-value stocks. The safest investment, which he thinks has been a good contra bet, has been staying put in HDFC Bank stock at a time most analysts expected the stock to slip.

“The stock has been a relative safe-haven for us. In terms of preference, Donald Trump’s press conferences, markets, and cricket (in that order) is where investors should focus their energies in the next few months,” Arora said.