FPI inflows not significantly correlated to LTCG

As the stock market struggles to recover from a two-year slump, there’s a rising clamour for the removal of long-term capital gains (LTCG) on equities to woo back foreign portfolio investors (FPIs). Market participants argue that India is among the few markets to tax foreign equity investments at a time when there’s pervasive pessimism about India’s markets in the global investing community. They say that if FPI outflows are left unaddressed, rupee weakness can spiral and domestic confidence can collapse. All these arguments are true to an extent. However, it is moot if doing away with LTCG tax will bring…