Foreign investors poured in over Rs 24,500 crore in Indian capital markets last month and analysts expect the inflows to rise after the Union Budget sought to address concerns on controversial issues like GAAR and retrospective taxation.
The inflows during February have taken take the total foreign investment in capital markets to Rs 58,252 crore (USD 9.42 billion) since the beginning of 2015. In January, overseas investors had pumped in Rs 33,688 crore in Indian debt and equities.
Foreign portfolio investors (FPIs) bought shares worth Rs 11,475 crore in February, while in the debt segment, they invested funds to the tune of Rs 13,088 crore, taking the total investment to Rs 24,563 crore, as per data compiled by the National Securities Depository Ltd (NSDL).
FIIs (Foreign Institutional Investors) were rechristened as FPIs last year under a new regulatory regime that has made it easier for them to invest in India.
Market participants attributed the robust inflows to positive investor sentiment driven by the government’s announcement of several reform measures in recent months and expectations of more announcements in the Union Budget.
They further said that inflow will continue in the coming months, as Finance Minister Arun Jaitley announced a slew of measures to attract overseas investment in the country.
In 2014, the net investment by overseas investors in debt markets was Rs 1.59 lakh crore, while the figure for equities stood at Rs 97,054 crore. Overall net investment by foreign investors stood at Rs 2.56 lakh crore last year.
To soothe investors’ nerves, Finance Minister Arun Jaitley yesterday deferred the controversial General Anti-Avoidance Act (GAAR) by two years, saying its immediate applicability can create ‘panic’ in markets.
Besides, the new rules would be put in place after resolving “certain contentious issues” and the implementation would eventually happen with prospective effect, he said. “Today I still feel there is vulnerability in Indian economy in terms of attracting investments.
“If I bring in GAAR now with or without amendment, it will create panic in the market. This is not the stage where I can afford allowing investors to run away or investment not to come… Inadequate investment can also affect rupee-dollar parity,” Jaitley said.
Religare Enterprises ‘ Chairman and MD Sunil Godhwani said that the deferment of GAAR rules will improve business confidence in India and help attract global fund flows.
Reliance Mutual Fund CEO Sundeep Sikka also said that deferment of GAAR was a major positive move for foreign investors and overall investor sentiment.