FPIs turn cautious and dump Indian equities above Rs 5,200 Crore so far in April

Foreign investors turned cautious towards Indian equities and withdrew over Rs 5,200 crore from the market so far. At the same time, investors showed a change in attitude towards the Indian debt market and raised Rs 6,174 crore this month, as of April 19, 2024, official data from the depositories revealed.

The investors’ bearish sentiment was attributed to concerns over changes in the tax treaty between India and Mauritius, which will put increased scrutiny on investments made in the country through the island, PTI reported.

The net outflow of funds from Indian equities stood at Rs 5,254 crore during the period under review. Earlier, the investors deposited Rs 35,908 crore in March and Rs 1,539 crore in February.

Commenting on the change in fund flows, Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India said, “The key trigger for the sale of FPI was the amendment in India’s tax treaty with Mauritius, which now imposes stricter supervision on would impose investments. in India through the island nation. The two countries have agreed on a protocol amending a double taxation agreement (DTAA). The protocol specifies that tax relief cannot be used for the indirect benefit of residents of another country.” The expert added that the majority of investors spending through Mauritius entities in the Indian markets are from other countries.

Elaborating on other concerns dampening sentiment, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: “Additionally, higher-than-expected US inflation and the resulting spike in bond yields (the ten-year rise above 4.6 percent) led ) to large sales in the Indian market. Another major concern is the increased geopolitical situation in the Middle East, with increased tensions between Iran and Israel.”

The analysts noted that domestic institutional investors (DIIs) are currently enjoying high liquidity and retail investors and high net worth individuals (HNIs) remain positive about the domestic market. This will help balance the outflow of foreign funds with domestic money.

Also Read: EPFO ​​February Salary Data Shows Over 56 Percent of New Members Include Young Job Seekers