JP Morgan report: Due to tax reforms and policy support, a large amount of domestic capital is coming into the Indian stock market.

New Delhi, June 28. Tax reforms and several policy measures implemented in recent years have made equity investment in India more attractive. This has created favorable conditions for continued domestic investment inflows into the stock market despite relatively low returns in the last two years. This information was given in a report by JP Morgan.

The global investment bank said recent changes related to taxes on long-term capital gains, debt mutual funds and insurance products have made equities more attractive, thereby further shifting the savings of Indian households towards financial assets.

JPMorgan pointed out that equities currently attract a 12.5 per cent long-term capital gains tax while policy changes like removal of indexation benefits, tax on proceeds from certain insurance policies and slab-rate tax for debt mutual funds have changed the equation in favor of equity investments.

The global investment bank says changes in tax and regulatory norms, as well as increased participation through systematic investment plans (SIPs), are expected to continue to drive domestic inflows into the equity market.

According to the report, foreign portfolio investors reduced their investments in Indian equities during financial years 2025 and 2026, yet domestic investors remained firm. During this period, even though the benchmark index gave modest returns, retail investors continued investing through SIP. This shows that this is a fundamental change in investment practices, and not a reaction to short-term market fluctuations.

Continued participation of domestic investors is a key strength of Indian equities

JPMorgan said continued participation from domestic investors has emerged as an important stabilizing force for Indian equities. This has helped in reducing the fluctuations in foreign fund outflows and global risk aversion.

India’s IT sector may remain sluggish for a long time

Apart from this, the global investment bank has adopted a cautious approach towards India’s IT sector. He says that this industry may have to face slow growth for a long time because the changes brought by Artificial Intelligence (AI) and geopolitical uncertainty are impacting the demand. JP Morgan says that there is uncertainty regarding demand in this sector due to the unprecedented combination of challenges related to technology and business cycle.