Verma noted that prior to this correction, the Indian stock market had experienced a robust rally.
Economist and BJP national spokesperson Sanju Verma on Wednesday dismissed claims that the recent decline in the Indian stock market is linked to the Long-Term Capital Gains (LTCG) tax. Instead, she attributed the downturn to global economic instability, pointing to external factors as the primary cause.
In an exclusive conversation, Verma responded to comments made by fund manager Samir Arora, who had suggested that the fall in the stock market was due to high LTCG tax rates. Verma refuted this claim, arguing that the Indian stock market’s decline was driven by global economic factors, not the tax regime.
“This is not true. The Indian market is falling due to global factors,” Verma asserted. She went on to highlight that the 12.5% LTCG tax, which has sparked debates in financial circles, will not come into effect until April 2026 and is non-discriminatory, applying uniformly to retail investors, institutional investors, and foreign investors.
“The government has ensured that the LTCG tax rate remains uniform for all types of investors,” Verma explained, seeking to quell concerns about the impact of the tax on the stock market. She added that the debate around LTCG tax was becoming more pronounced, with some market observers urging the government to reconsider the current tax framework, which they argue could be affecting market sentiment.
Despite these concerns, Verma insisted that the downturn was part of a broader global trend. “Stock markets in Shanghai, Hong Kong, Japan, and Singapore are also witnessing a downturn,” she pointed out, emphasizing that the decline in India’s stock market is part of a larger global economic slowdown.
Verma noted that prior to this correction, the Indian stock market had experienced a robust rally. The Nifty index had surged past the 26,000 mark by September 2024, a remarkable rise from 7,500 in March 2020. Similarly, the Sensex had climbed from 25,600 in March 2020 to an all-time high of 86,000 by September 2024.
“The rise in markets over the past four and a half years—249% for the Nifty and 235% for the Sensex—was extraordinary, and such a correction was to be expected,” Verma said. She emphasized that the steep climb in stock market indices had been unsustainable, and market corrections are a natural part of the financial cycle.
Verma also pointed out that the recent decline in market capitalisation should be viewed in context. “The total market capitalisation of all companies listed on the Bombay Stock Exchange (BSE) has declined by Rs 95 lakh crore in recent months.
However, this should be seen in the broader picture,” she remarked.
In 2013, the total market capitalisation of BSE-listed companies stood at Rs 93 lakh crore. This figure had increased dramatically to Rs 457 lakh crore by 2024, highlighting the substantial long-term growth of the market. While the recent correction may have been significant, Verma argued that the overall trajectory of India’s stock market remains positive.
Verma also underscored the rapid growth of mutual funds in India over the past decade. She pointed out that the Assets Under Management (AUM) of mutual funds in India had risen dramatically, from Rs 8 lakh crore in 2013 to Rs 69 lakh crore in November 2024. This growth reflects increasing investor confidence in India’s financial markets and the country’s economic prospects, despite the recent market downturn.
“The mutual fund industry’s growth over the last decade has been phenomenal, and it continues to provide a stable investment avenue for Indian retail investors,” she said, adding that this growth is a testament to the resilience of India’s financial sector.
In conclusion, Verma remained optimistic about the long-term prospects of the Indian economy and stock market. She acknowledged the short-term challenges, but emphasized that the broader economic fundamentals remain strong, with positive growth in key sectors such as agriculture and services. She also reiterated that the global economic environment, rather than domestic tax policies, is the primary factor influencing the stock market’s recent performance.
With the global economic landscape facing uncertainties, Verma concluded by urging investors to adopt a long-term view, highlighting that market corrections, while unsettling in the short term, are an inherent part of the financial cycle and should not be cause for undue alarm.
