NEW DELHI: The sell-off in India's equity markets is due to weak global sentiment and not because of the long-term capital gains tax announced in the budget, finance secretary Hasmukh Adhia said. The 10% tax on longterm capital gains (LTCG) is a "subsidised rate" because such gains from the sale of unlisted scrips and immovable property are taxed at 20%, Adhia said.
"It is very unfortunate that our move came in at wrong time because of global markets also going down. There is a strong connection of all equity markets. The MSCI All Country World Index of equity markets went down by 3.4% last week, especially on Thursday and Friday," Adhia said at a post-budget meeting organised by the Confederation of Indian Industry.
"If the entire world index has gone down by 3-4%, naturally it would have ripple effect on Indian stock market also. It is not LTCG tax effect."
The benchmark 30-share BSE Sensex fell 0.88% on Monday, declining for the fifth straight session. The Nifty 50 on the National Stock Exchange dropped 0.87%. Asian stock markets declined on Monday, with Japan's Nikkei losing 2.55%. In Europe, stock indices traded lower. The US stock markets had their worst weekly loss in about two years last week, triggered by a sharp rise in Treasury yields amid inflation concerns.
The Budget for 2018-19 presented on February 1 proposed a 10% tax on gains of over Rs 1 lakh made from the sale of shares held for over a year, starting April 1. All gains made up to January 31, 2018, have been grandfathered – or exempt from the LTCG tax.