FII inflows in focus after India-Mauritius tax pact, remained net buyer in Q4 FY16; 5 key takeaways for equity investors

Foreign institutional investors sold shares worth Rs 11126.40 crore and Rs 5521.39 crore in January and February 2016. However, they poured Rs 21,142.92 crore in March 2016.


Outflow in January and February 2016 by foreign institutional investors (FIIs) or foreign portfolio investors (FPIs) reversed in March 2016 which resulted in a net inflow of Rs 4,495.09 crore in the Indian equity markets during the fourth quarter of 2015-16. Foreign institutional investors sold shares worth Rs 11126.40 crore and Rs 5521.39 crore in January and February 2016. However, they poured Rs 21,142.92 crore in March 2016.

In sync with the global rally in emerging markets, which was triggered by rising commodity prices, foreign portfolio investors, or FPI, were net buyers in energy, utilities and metals and net sellers in pharma, auto and PSU banks in FY16.

In the ongoing financial year 2016-17, the net inflow has been Rs 8,126 crore till May 10. ICICI Securities in a research note said, “We believe that the trend will not reverse meaningfully in the near term.”

On India-Mauritius tax pact, Rohit Gadia, founder and CEO, CapitalVia Global Research, said, “With this change, the capital gains tax concession for investments from Mauritius into India gradually comes to an end. There is still one year of time before implementation and will provide more clarity going forward. Although, the decision can impact on short term sentiment but we doubt it will impact long term investor fund to coming into the India because of this considering the fact that for FIIs, investing in listed shares on the stock market, capital gains on shares held for more than 12 months would any way continue to be exempt from tax. And the way the treaty changes implementation has been thought off is well designed so it is not likely will create an immediate impact on FIIs inflow.”

Sudip Bandyopadhyay, chairman and managing director, Inditrade Capital, said, “I do not see any major impact on foreign inflows in India after India-Mauritius tax pact.”

FII inflows are in limelight after India-Mauritius signed tax avoidance treaty on Tuesday. READ MORE | India-Mauritius tax pact: FII inflows to be more durable

Analysing the institutional flows in the fourth quarter of 2015-16, ICICI Securities concludes:

1). Top 5 stocks where FPI actions reversed: Buying momentum reversed (FPIs stake increased over Q1-Q3 and dipped in Q4 of FY16) in Dr Reddy’s, Lupin, Maruti, Tata Chemicals and United Breweries while the selling momentum reversed (FPI stake decreased over Q1-Q3 and rose in Q4) in Eicher Motors, JSW Steel, UPL, Sun Pharma and Power Grid.

2). FPI holdings in Nifty stocks dipped in Q4FY16: FPIs holding in Nifty stocks dipped marginally (10 bps QoQ) to 28.8 per cent in Q4FY16 due to selling in auto, pharma (Dr Reddy’s and Lupin) and PSU banks (SBI) and heavy buying in Industrials (RIL, NTPC and Ultratech) , IT (Infosys) and Auto (two wheeler & CV’s – Eicher)

3). FPIs continue to have top overweight stance on NBFCs, telecom, private banks and pharma: Amongst the sectors where they have top overweight positions (NBFC, telecom, private banks and pharma), FPIs lightened up on pharma. Among their top underweight sectors (energy, capital goods, PSU banks), FPIs further lightened their position in PSU banks and capital goods and increased their position in energy stocks.

4). Where FPIs and DIIs differ: For the quarter ended March 2016, FPIs were overweight and DIIs were underweight in private banks, NBFC and pharma. However, FPIs were underweight and DIIs were overweight in consumer staples, infrastructure, energy and PSU Banks.

5). FPIs/DIIs increase stake in utilities: QoQ, utilities was the only sector which was bought by both FPIs and DIIs.

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First published on: 11-05-2016 at 12:45 IST
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