After four months of intense selling, overseas investors turned net buyers in February and have so far pumped in over Rs 5,800 crore in the capital market, enthused by clarity on FPI taxation. The latest inflow followed a net pullout of Rs 80,310 crore from equity and debt together in the past four months (October-January). Prior to that, FPIs had invested over Rs 20,000 crore in the capital market in September 2016.
According to depository data, foreign portfolio investors (FPIs) infused a net sum of Rs 2,088 crore in equities during February 1-10 and another Rs 3,739 crore in the debt segment, translating into a total inflow of Rs 5,827 crore (USD 865 million). “After being net sellers in January 2017, FPIs pumped in funds post-Budget, especially after they received clarity on capital gains taxation as well as tax on indirect transfers,” Vidya Bala Head Mutual Fund Research at Fundsindia.com said.
“Also, the demonetisation fears did not reflect much in the earnings numbers which could also be one more reason for FPIs to repose faith in the Indian markets. A lesser than painful demonetisation impact and the confidence arising from digitisation and resulting transparency could see FPIs viewing Indian markets more seriously,” she added
Besides, the no rate cut stance has caused some dips in the price of debt instruments (as yields moved up) offering opportunities for buyers, Bala said. Finance Minister Arun Jaitley, in his Budget speech, proposed that category I and II FPIs should be exempted from taxation on indirect transfers.
“No change in long-term capital gains tax on equities has lightened investors’ fears on transaction cost,” said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services. Meanwhile, Nikkei Markit India Manufacturing PMI in January rebounded from the demonetisation downturn by increasing to 50.4, from 49.6 in December, amid rising order books, production as well as buying levels and expansion in the sector. Further, SIAM’s auto numbers have shown that passenger vehicle sales in India rose by 14 per cent in January.