16 Aug 2024Updated: May 2026
India's equity markets have established themselves as one of the most significant investment destinations globally. The BSE market capitalisation crossed $5 trillion in 2024, making India the fourth-largest equity market by market cap — ahead of Hong Kong and approaching Japan. For NRIs and global investors, this means India is no longer an emerging market bet but a mainstream allocation in diversified portfolios. For domestic investors, it means that equity market participation through mutual funds, direct equity, or SME IPOs has become a central part of wealth building.
Why India's Market Has Grown: Structural Drivers
The sustained market growth is not purely valuation-driven — it reflects structural changes in the economy and the investor base. Domestic retail investor participation has surged: monthly SIP (Systematic Investment Plan) inflows into mutual funds crossed ₹25,000 crore by mid-2025, providing a stable domestic demand base that cushions FII outflows. Demat account openings crossed 185 million in 2025, reflecting the formalisation of household savings into financial assets.
On the corporate side, India's top 500 companies have delivered sustained earnings growth driven by domestic consumption, infrastructure spending, and the services export sector (particularly IT/ITES and digital services). The banking sector's improved asset quality — with gross NPA ratios at multi-year lows — has underpinned the financial sector's market performance.
Tax Framework for NRI Equity Investors: FY 2026-27
NRIs can invest in Indian listed equity through the Portfolio Investment Scheme (PIS) under FEMA — either on a repatriable basis (from NRE/FCNR funds) or non-repatriable basis (from NRO funds). The tax treatment is the same as for resident investors: LTCG at 12.5% on equity gains above ₹1.25 lakh per year (Section 112A, Finance (No. 2) Act, 2024); STCG at 20% (Section 111A). TDS at applicable rates is deducted at source by the broker/depository on redemptions.
Mutual fund investments by NRIs follow the same route — available on repatriable or non-repatriable basis, with redemption proceeds credited to the NRE or NRO account respectively. Most major AMCs accept NRI investments with standard KYC, though US and Canada-based NRIs may face restrictions at certain fund houses due to FATCA compliance requirements.
SME IPO Opportunity: India's Growing Capital Market Access
India's SME IPO market — listed on BSE SME and NSE Emerge platforms — has seen substantial growth in 2024–25. Over 200 SME IPOs were listed in FY 2024-25, raising over ₹8,000 crore. For small and mid-size businesses in Kerala and across India, the SME IPO route provides access to public capital, improved brand visibility, and a path to eventual migration to the main board. The compliance requirements post-listing — quarterly financial results, SEBI disclosure obligations, ICAI audit standards — are demanding but manageable for businesses with good governance frameworks.
Implications for Tax Compliance
The growth in market participation has increased the importance of accurate ITR filing for equity investors. The AIS (Annual Information Statement) now captures every securities transaction — purchases, sales, IPO allotments, mutual fund redemptions, and dividend receipts — reported by brokers and AMCs under Section 285BA. Any discrepancy between ITR-declared capital gains and AIS data triggers an automated notice. Investors should reconcile their broker's tax P&L statement with AIS data before filing each year.
Regi Tom Antony And Associates provides tax advisory, ITR filing for equity investors, capital gains computation, and NRI investment compliance services. For NRI advisory resources, visit nriblueprint.com. For SME advisory and IPO readiness, visit smeadvisory.in. Contact: letstalk@rtaandassociates.com | Kakkanad, Kochi.