Indian markets trade in green amid hopes of LTCG relief and reversal in FII outflows
Indian stocks defy global sell-offs as hopes of LTCG tax relief and reversing FII outflows drive the Sensex and Nifty higher.
Indian markets trade in green during early sessions, showing remarkable resilience even as global peers face heavy selling pressure. While major US and Asian indices plummeted due to rising inflation concerns, domestic benchmarks like the BSE Sensex and NSE Nifty 50 managed to post gains, buoyed by optimism surrounding potential tax relief and a possible shift in foreign investor behavior.
Domestic Indices Defy Global Sell-Off
As of the latest trading updates, the BSE Sensex climbed 221.23 points, or 0.30 per cent, to reach the 73,003.12 mark. Similarly, the NSE Nifty 50 saw an uptick of 50.35 points, gaining 0.22 per cent to trade at 22,673.05. This positive movement stands in stark contrast to the heavy corrections witnessed in international markets.
The divergence is particularly notable when compared to the GIFT Nifty, which emerged as a lone gainer, rising 65 points to sit at 22,687.50. While the local sentiment remains cautiously optimistic, the global landscape remains turbulent.
US Inflation Sparks Global Tech Rout
The primary driver behind the international market slump appears to be the latest inflation data from the United States. US annual inflation accelerated to 3.7 per cent in September 2026, up from 3.4 per cent in the preceding two months. This spike, largely attributed to rising gasoline prices, has heightened fears regarding the Federal Reserve's next move on interest rates.
The impact on US markets was immediate and severe:
- Nasdaq: Experienced the most significant hit, shedding 511.51 points (1.88%) as AI-related stocks bore the brunt of the selling.
- S&P 500: Declined by 86.51 points to reach 7,718.94.
- Dow Jones Futures: Stood at 51,545.63, down by 75.85 points.
Asian markets were equally hard hit. Japan's Nikkei 225 tumbled 5.20 per cent, while South Korea's Kospi saw a massive retreat of 8.72 per cent. Thailand's SET Composite also dipped by 0.78 per cent.
Why India is Holding Steady
Experts suggest that the Indian market is finding support from several domestic factors that are insulating it from the global contagion.
Potential LTCG Tax Relief
There is growing speculation that the Finance Ministry might reconsider the taxation of Long-Term Capital Gains (LTCG) in the upcoming Budget. Such a move is expected to provide significant resilience to the market and encourage domestic participation.
Reversal in FII Trends
V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, noted that the current correction in global AI stocks could actually benefit India. He suggested that Foreign Institutional Investors (FIIs), who have been shifting capital from Indian equities to AI stocks, might halt this trend and potentially reverse it under favorable conditions.
Sectoral Strength
The IT and Financial sectors are providing much-needed stability:
- IT Sector: Optimism following HCLT's results is expected to keep the IT index strong.
- Financials: Anticipation of robust Q2 results from major financial institutions is providing a cushion for the broader market.
The Geopolitical Wildcard
Despite the current uptick, analysts warn that macro headwinds remain. Mayuresh Joshi, Director and Head of Equity Research at MarketSmith India, pointed out that while Indian equities may have weathered the worst of the structural sell-off due to attractive valuations, the geopolitical crisis remains a pivotal risk factor. He noted that while global markets are reacting sharply to inflation and capital outflows, a potential de-escalation in geopolitical tensions could lead to a swift reversal in market trends.
In the commodities market, Brent crude stood at USD 104.38 per barrel, down 1.58 per cent, while gold saw a gain of 1.12 per cent, trading at USD 4,151.35 per ounce.