While the investments in the debt market have worsened, the equity market in November picked up to an 8-month high.
The foreign portfolio investors are gradually bouncing back to Indian markets after the Narendra Modi-led government has announced measures to attract investments. India received foreign portfolio investments of Rs 22,999 crore in November, which is the highest since April 2019, according to the National Securities Depository Limited (NSDL). Such investments drastically fell after Finance Minister Nirmala Sitharaman announced the super-rich tax on institutional investors. The tax surcharge for foreign entities which are registered as non-corporates, spooked investors as the surcharge could have impacted 40 per cent of the FPIs. Initially, the government had left no possibility of withdrawing the decision but seeing the widespread pessimism in the FPI market, the government rolled it back.
While the investments in the debt market have worsened, the equity market in November picked up to an 8-month high, driving the overall portfolio investments beyond Rs 20,000 crore mark. To further boost the investments, the government is considering doing away with multiple taxes such as LTCG, DDT, STT, etc, and may move to a single-tax structure on equity investments, making compliance easier.
Other major announcements such as the reduction in the corporate tax and bank recapitalisation may also have strengthened the trust of the foreign investors. Meanwhile, the share markets also touched their lifetime peaks in the month of November. A higher market gives the investors higher returns and thus becomes more suitable to receive portfolio investments.
In November, even the first week saw a net inflow of over Rs 12,000 crore as institutional investments. However, December has started with a pullback of Rs 751 crore from the Indian equity markets.