FPIs withdraw over Rs 5,200 crore in April so far amid tweaks in tax treaty with Mauritius
According to the data with the depositories, Foreign Portfolio Investors (FPIs) made a net outflow of Rs 5,254 crore in Indian equities this month (till April 19).
The major trigger for FPI selling was the tweak in India's tax treaty with Mauritius, which would now impose higher scrutiny on investments made in India via the island nation, Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said.
The two nations have reached a consensus on a protocol amending a double taxation avoidance agreement (DTAA). The protocol specifies that tax relief cannot be utilized for the indirect advantage of residents from another country. In fact, most of the investors investing through Mauritius entities into Indian markets are from other countries, he added.
Additionally, hotter-than-expected US inflation and the consequent spike in bond yield (the 10-year rising above 4.6 per cent) led to big selling in the Indian market, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
Another major concern is the surcharged geopolitical situation in the Middle East with heightened tensions between Iran and Israel, he added.
Since domestic institutional investors (DIIs) are sitting on huge liquidity and the retail and high net-worth individual (HNI) investors in India are highly optimistic about the Indian market, FPI selling will be largely absorbed by domestic money.
Apart from equities, FPIs withdrew Rs 6,174 crore from the debt market during the period under
