FPI surcharge rollback fails to cheer foreign investors as outflow from equities continue

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Published: September 2, 2019 11:45:23 AM

Even after the government announced a rollback of surcharge on FPIs, the outflow from equities has continued amid weak investor sentiment owing to domestic and global concerns.

The FPIs are on a selling spree after July 5 when Finance Minister announced imposition of an additional surcharge on FPIs in the budget.

Even after the government announced a rollback of surcharge on FPIs, the outflow from equities has continued amid weak investor sentiment owing to domestic and global concerns. The Indian equities worth Rs 5,485 crore has been sold in the last five trading sessions since Finance Minister Nirmala Sitharaman enhanced surcharge rollback on August 23, 2019. The investors are basically concerned about the overall economic scenario, in addition to global trade wars as of now, the analysts say. The slowdown in economy and muted consumption has had an impact on the investor sentiment in the recent past, they add. FPIs pulled out a net amount of Rs 5,920 crore from the capital markets in August. The FPIs are on a selling spree after July 5 when Finance Minister announced imposition of an additional surcharge on FPIs in the budget.

The problems around growth, corporate earnings and NBCS have added pessimism among both domestic and foreign investors, CJ George, MD, Geojit Financial Services told The Indian Express. Even the stimulus measures announced by the government doesn’t seem to have a desired impact on the investors, he added.  The FPIs withdrew a net amount of Rs 17,592.28 crore from equities and infused in a net sum of Rs 11,672.26 crore in the debt segment, translating into a total net outflow of Rs 5,920.02 crore during August 1 to 30, the latest depositories data shows. In July, foreign investors had withdrawn a net amount of Rs 2,985.88 crore from the markets.

Also read: Economists predict further growth cut, deeper interest-rate cuts amid GDP slump

The corporate earnings are being impacted by the fall in private consumption and low inflation is impacting the growth of corporate earnings, The Indian Express reported citing an unidentified CIO of a leading mutual fund. The weak pace of growth in direct tax collections has also increased the worries around the ability of the government to use the additional dividend given by the RBI for capital expenditure, he added.

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