Morgan Stanley's India Equity Strategist, Ridham Desai, has outlined three crucial capital market reforms that, if implemented in the upcoming Union Budget 2026, could significantly revive foreign institutional investor (FII) interest in Indian equities. This analysis comes in the wake of substantial FII selling, with foreign investors withdrawing an estimated $21 billion from Indian markets since early 2025. The continuous outflows have led market strategists to look towards the budget as a potential catalyst for a turnaround in investor sentiment and foreign capital flows. The three key reforms proposed by Desai are: firstly, broadening the base of foreign portfolio investors (FPIs) to allow a greater diversity of capital pools to access Indian stocks. This aims to attract a wider array of global investors. Secondly, simplifying the existing framework for buyback taxation, which is currently seen as potentially distorting capital structures and hindering long-term capital market flows. A simplified regime could make Indian markets more attractive for companies and investors. Lastly, Desai advocates for further enhancing the tax benefits offered at GIFT City, India's international financial services hub. Strengthening incentives at GIFT City is expected to bolster its appeal as a global financial gateway and facilitate increased foreign investment. These recommendations from a prominent analyst like Ridham Desai, who is the Managing Director, Head of India Research, and Equity Strategist for India at Morgan Stanley, underscore the market's expectations for a reform-focused budget aimed at improving India's attractiveness to global capital.