Can China's stamp duty cut on stock trades accelerate FII outflows from India? Experts weigh in

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China lowers stamp duty on stock trades, tightens IPOs to woo investors Beijing's current move is aimed at giving a boost to market sentiment as the world's second-largest economy has been struggling in the wake of the Covid-19 pandemic. Earlier in August, China's central bank went for a smaller-than-expected cut in a key lending benchmark to boost economic recovery. However, the demand for a more robust policy response and hefty government spending is growing.

China's stamp duty cut is expected to have a very short-term impact on the Chinese market and it is unlikely to have a significant impact on other emerging markets (EMs) like India. Experts do not see a risk of foreign capital outflow from the Indian market because of this. Investor apprehensions are currently centred around China's economic well-being.

Without a robust and impactful policy response coupled with substantial government investments, the prospects for the Chinese market could continue to appear subdued. "China has not only halved the stamp duty but also lowered the margin requirements for buying stocks. Both these steps would help in boosting the markets in the short term," said Nitin Agrawal, CEO of Torus Oro PMS.

"Foreign investors are still concerned about the long-term prospects of the Chinese economy and the market has seen record selling from foreign investors over the past few weeks. The property sector is also in bad shape and the stamp duty cut is not going to change long-term fundamentals. We don't see a risk of any outflow of foreign capital from India due to this," said Agrawal.