• The Indian Rupee weakens against the US Dollar after the announcement of the Indian Fiscal Budget 2024-25.
• Indian government raises capital gains taxes with immediate effect.
• This week, the US Dollar will be influenced by a slew of US economic data.

The Indian Rupee weakens to near 83.70 against the US Dollar (USD) in Tuesday’s European session. The Indian currency faces pressure due to a sharp sell-off in equity markets after the announcement of the Fiscal Budget 2024-25.

Indian Finance Minister Nirmala Sitharaman proposed to hike taxes on Long-term Capital Gains (LTCG) and Short-term Capital Gains (STCG) with immediate effect. The centre has raised taxes on LTCG and STCG from 10% to 12.5% and from 15% to 20%, respectively. While the exemption limit on LTCG has been raised to Rs. 1.25 lakhs from Rs. 1 lakh.

Higher taxes on capital gains are an unfavorable scenario for foreign investors who are keen to invest in India through direct investment or institutional routes. This could have a negative impact on the Indian rupee in near-term.