New Delhi, June 28 -- Government policy measures and changes in the tax treatment of various financial products have made equities increasingly attractive compared with other investment options, a JP Morgan equity research report said, adding that the trend is likely to support sustained inflows into Indian capital markets.

The report said policy and taxation changes have strengthened the case for equity investing even as market returns remained subdued over the past two years.

"Policy and tax are also supportive: equity is taxed at 12.5% LTCG, and the removal of indexation, taxation of insurance policy proceeds, and slab-rate taxation for debt mutual funds improves equity's relative appeal," the report said.

According to JP Morgan, th...