Harendra Kumar, MD and CEO of Elara Capital, has slammed the demands for tax cuts for Foreign Institutional Investors (FIIs), stating that such requests come from hedge funds and high-frequency traders rather than genuine long-term investors.
- Elara Capital CEO opposes tax cuts for FIIs despite net outflows.
- Claims complaints are driven by hedge funds and high-frequency traders.
- Predicts Nifty could reach 28,000 points in the next 15 months.
- Highlights that long-term capital gains (LTCG) remain globally competitive.
Speaking on the sidelines of the annual 'Ashwamedh' conclave, Harendra Kumar, the Managing Director and CEO of Elara Capital, asserted that dwindling stock market returns for Foreign Institutional Investors (FIIs) should not be the catalyst for changes in national tax policy. He bluntly stated that pushing for tax reductions for FIIs is essentially "asking the government to fund their underperformance."
Mr. Kumar pointed out a critical inconsistency in the demands for tax relief. He questioned why these investors remained silent two years ago when they were generating substantial profits in the Indian markets. According to him, FIIs must be capable of generating returns after accounting for costs and rupee depreciation, rather than relying on government subsidies through tax breaks.
Why This Matters
BozokMedia analysis shows that there is a growing divide between institutional brokers and fund managers regarding India's tax regime. While organizations like the ANMI are lobbying for the abolition of LTCG or cuts in STT to boost retail participation, the leadership at Elara Capital views this as a misplaced demand that targets the wrong demographic—specifically speculative hedge funds rather than stable institutional capital.
"The FII amount is over the cost and rupee depreciation. They should make money post-tax."
The current tax structure includes a Securities Transaction Tax (STT) of 0.1% on delivery and 0.025% for intraday trades. Long-term Capital Gains (LTCG) are taxed at 12.5% for gains exceeding ₹1.25 lakh on holdings kept for over 12 months. Mr. Kumar maintains that these rates are competitive and do not require downward revision, even for domestic investors.
Looking ahead, Kumar expressed optimism about India's structural growth. He identified water treatment, power, and EV auto ancillaries as the dominant equity themes that will drive future investments from both FIIs and Domestic Institutional Investors (DIIs), potentially pushing the Nifty to 28,000 points within 15 months.
| Tax Type | Current Rate | Target Group |
|---|---|---|
| STT (Delivery) | 0.1% | All Equity Investors |
| STT (Intraday) | 0.025% | Day Traders |
| LTCG | 12.5% (>₹1.25L) | Long-term Investors |
The urgency of the debate comes amidst a challenging period for foreign capital. As of September 2026, the calendar year has seen a massive net outflow of approximately ₹2.2 lakh crore by FIIs, marking the second consecutive year of capital flight. During the same period, the benchmark Nifty 50 declined by more than 2.5%.
Frequently Asked Questions
1. What is the difference between STT and LTCG?
STT (Securities Transaction Tax) is a tax levied on every purchase and sale of securities, whereas LTCG (Long-Term Capital Gains) is a tax on the profit made from selling an asset held for a long duration.
Net outflows are typically driven by higher interest rates in developed markets (like the US), currency volatility, and a correction in expensive Indian equity valuations.
