Friday, December 03, 2021

FPIs turn sellers, offload equities worth $60 million

Union finance minister Arun Jaitley, in his Budget speech, proposed that FPIs from category I and II should be exempted from taxation on indirect transfers.

By: ENS Economic Bureau | Mumbai |
February 7, 2017 6:45:46 am

 

Foreign portfolio investors (FPIs) who were buyers for three consecutive sessions starting February 1, buying $371.11 million worth of stocks and bonds, on Monday offloaded equities worth about $60 million, provisional data from BSE showed.

The government successfully dispelled apprehensions of foreign investors who feared they would be taxed on indirect transfer. FPIs infused a net sum of $207.4 million in equities during February 1-3 and another $163.71 million in the
debt segment.

Union finance minister Arun Jaitley, in his Budget speech, proposed that FPIs from category I and II should be exempted from taxation on indirect transfers. However, the indirect tax provisions will still apply to category III FPIs.

“The clarification by the finance minster certainly clears the ambiguity on taxation of indirect transfer provision, this move is likely to encourage FPIs to invest on Indian market,” said Rajendra Nayak, tax partner, Ernst & Young Services.

FPIs pulled out equities and bonds worth just $388.4 million in January following sales of $5.4 billion in November and $3.6 billion in December. A series of events — the election of Donald Trump as President of the US, the hike in Fed rates and India’s decision to demonetise high-value currency notes — resulted in a heavy bout of profit taking towards the end
of 2016.

Though in CY2016 foreign investors had bought stocks worth $2.9 billion and pulled out debt instruments worth $6.5 billion from Indian market, an economic/strategy report by Kotak Institutional Equities, which was published in February 2, said,

“Our analysis of bond demand-supply suggests that demand is likely to undershoot supply by
Rs 600 billion in FY2018 in the absence of OMO purchases and limited participation by FPIs.”
Most other emerging markets have seen FPI inflows in January although in India overseas investors were net sellers in five months of CY16.

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