'Cut capital gains tax back to 10%....': Helios Capital founder's fix to prove FIIs dead wrong

Foreign Institutional Investors (FIIs) have been steadily pulling out of Indian equities, selling a massive ₹66,602 crore in the cash market by January 24, 2025. This selling spree, driven by a stronger dollar and rising US bond yields, has put pressure on Indian markets and added volatility.

Amid this backdrop, Helios Capital founder and fund manager Samir Arora has suggested a bold move to counter the FII exodus. “FIIs have been selling Indian stocks for the past 3-4 months. There is one way to show them how wrong they are,” he tweeted.

Arora’s recommendation? A dramatic cut in capital gains tax. “The Government of India should cut capital gains tax back to 10% so the market rallies a lot and to show these FII losers how wrong they have been in selling Indian stocks. What an idea Sir ji,” he wrote.

The financial sector, a significant part of FII portfolios, has borne the brunt of this selling. However, the information technology (IT) sector has displayed some resilience, benefiting from improved business prospects and positive management commentary.

Analysts, including V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, believe the FII selling is unlikely to abate unless two critical factors change: the dollar index drops below 108 and US bond yields fall below 4.5%. “So long as these indicators remain elevated, the selling is expected to continue,” he said.

While Arora’s suggestion of cutting capital gains tax to reignite market momentum may seem unorthodox, it reflects the growing frustration among market participants as FIIs continue to exit Indian equities.