Foreign investors withdraw Rs 10,000 crore from Indian stock market post-budget: Here’s why
PTC News Desk: Since the Union Budget, foreign portfolio investors (FPIs) have withdrew about Rs 10,710 crore from the Indian stock market due to increased taxes on capital gains from equities investments and derivatives trades. FPIs sold stocks valued at Rs 2,975 crore on July 23, Rs 5,130 crore on July 24, and Rs 2,605 crore on July 25, according to stock market data.
Simultaneously, since July 23, domestic institutional investors have purchased stocks valued at around Rs 6,900 crore. Is had purchased stocks worth about Rs 18,000 crore between July 12 and July 22 in anticipation of a number of reform initiatives prior to the Budget.
Nirmala Sitharaman made significant pronouncements regarding capital gains tax in the Budget. Specifically, it is recommended that the rate of tax on long-term capital gains (LTCG) be fixed at 12.5 per cent for all asset classes, regardless of whether the transferor is a resident or non-resident.
According to a report by Nishith Desai Associates, non-resident investors would pay a higher rate of capital gains tax (LTCG) on all asset classes, even if the streamlining of the capital gains regime is a desirable development and in many situations the rates have fallen. The tax rates for listed securities have been raised, even for FPIs: from 10 per cent to 12.5 per cent for LTCG and from 15 per cent to 20 per cent for STCG.”
The most important aspect of institutional equity flows into the Indian market, according to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, is the unpredictable nature of FPI flows and the steady growth of DII flows. While FPIs alternated between buying and selling throughout the first several months of CY 24, DIIs consistently engaged in buying.
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