LTCG Tax Cut May Spark Short Rally, Says Brokerage Report

The recent brokerage analysis highlights that a reduction in Long‑Term Capital Gains (LTCG) tax could trigger a brief, two‑day surge in Indian equities, but the effect may be short‑lived. The report stresses that while the tax concession is a positive measure for an economy in need of capital, it should not be counted on as the sole driver of sustained foreign institutional investor (FII) inflows.

According to the study, the Nifty 50 could still climb to the 25,000 mark by December 2026, representing an 8.1% rise from current levels and implying a valuation multiple of around 18 times the projected earnings for FY 2027‑28. Earnings for FY 2028 are projected to increase by about 9% over FY 2027.

Analysts warn that a further 4‑5% market upside would push the index beyond its comfortable valuation band, edging close to a forward‑earnings multiple of 18.2, the recent average. The report also notes that artificial‑intelligence‑centric investments are unlikely to provide a significant near‑term boost for Indian markets.

Policy support appears constrained, with GST‑related advantages fading and commodity price pressures persisting. Geopolitical factors such as unclear trade talks with the United States and lingering risks surrounding Russian oil supplies add to the uncertainty. The finance minister has signalled openness to discuss possible changes to the LTCG regime in the upcoming budget, but the overall outlook remains cautious.