stock market correction: Shock election results, tax tweak may trigger equity correction on Dalal Street: Chris Wood, Jefferies

While a shock BJP defeat in 2024 elections is “extremely unlikely”, markets could correct even more than the 17% fall in two sessions after the election results in 2004, Wood said.

India’s national election results are due on June 4 with the ruling BJP is expected to return to power.

Wood added a bigger risk to markets could be potential changes in capital gains tax, which could be announced in the union budget in July.

“The issue is whether tax rates will be raised or whether the period to qualify for long-term capital gains, or a combination of both,” said Jefferies.Currently, short-term capital gains are levied at 15% and long-term gains at 10% with the holding period defined as one year.Woods notes another proposal would be to increase capital gains tax for retail investors but not for mutual fund investors.