In 28 sessions from July 2, they sold total more than Rs 24,900 crore worth of shares before the net buying on August 9
The reports of possible rollback of surcharges imposed on foreign investors in the budget seem to have cheered them. After 29 sessions, they turned net buyers in the market.
The assurance from the Finance Minister that the government would take steps to revive sentiment, and get the economy on track by mulling measures for NBFC, auto etc also boosted sentiment at the FII desks.
FIIs net bought Rs 203.73 crore from the secondary market on August 9, as per provisional data available on National Stock Exchange.
In 28 sessions from July 2, they sold total more than Rs 24,900 crore worth of shares before the net buying on August 9.
ensex corrected 4.6 percent and the Nifty lost 5.8 percent since July, but the major selling was seen in broader markets as BSE Midcap index fell 7.8 percent and Smallcap index shed 10.8 percent amid slowdown, lower-than-expected June quarter earnings, global trade tensions, etc.
Apart from that, another reason was a proposal to increase in tax surcharge to 25 percent, up from 15 percent on the super-rich individuals who earn between Rs 2 crore and Rs 5 crore, and for individuals earning more than Rs 5 crore, it proposed a surcharge of 37 percent, up from 15 percent. This increased tax burden was also applicable to foreign investors registered as trusts in India.
Finance Minister Nirmala Sitharaman, during a discussion on the Finance Bill in the Parliament on July 18, had suggested that FPIs could consider the option of structuring themselves as companies rather than trusts to avoid paying the increased surcharge.
A few days back, the FPIs conveyed to the Ministry that it would be difficult to convert current trusts into companies. The FPIs had thus sought a rollback of surcharges as a confidence-boosting signal from the government.
The Finance Ministry has estimated that the collection through the super-rich cess on FPIs will not amount to even one percent of the total estimated mobilization through this cess. Thus, barring them from it might be considered by the Ministry, said Gaurav Garg, Head of Research at CapitalVia Global Research.
He further said the slowdown-hit economy is expected to get a booster dose from the government with the Finance Ministry working on a stimulus package for the industry, which includes a plethora of financial measures ranging from tax cuts, subsidies and other incentives too, – the cess removal for FPIs being a key measure amongst these.
The rally in the last two sessions of the week ended August 9 also showed the dire need for reconsideration of taxation norms for FPIs. Hence, there is a high probability of favouring foreign portfolio investors, though the final announcements are still awaited, he added.
But if we go by the year-to-date (YTD) data, the picture is completed different. FIIs/FPIs net bought Rs 30,400 crore YTD 2019, against net selling of Rs 35,383 crore in same period last year.
