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.
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 ($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 of Mutual Fund Research at Fundsindia.com said.
Demonetisation fears were not reflected 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. Besides, the no rate cut stance has caused some dips in the price of debt instruments (as yields moved up) offering opportunities for buyers.Vidya Bala, Head - Mutual Fund Research, Fundsindia.com
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 at Geojit BNP Paribas Financial Services.
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