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India Stocks See $2.29B Foreign Inflow in 10 Days
3 Nov
Summary
- Foreign investors infused $2.29 billion into Indian equities recently.
- Improving corporate earnings and potential tax relief are boosting sentiment.
- Crude oil prices and capital gains tax remain key risks for inflows.
Foreign portfolio investors have infused $2.29 billion into Indian equities in the past 10 days, indicating a potential turnaround in investor sentiment. This resurgence is largely attributed to robust corporate earnings, which have surpassed forecasts, and the prospect of favorable changes in capital market taxation, specifically regarding long-term capital gains (LTCG).
Analysts suggest that a review of capital market levies by the government could significantly boost foreign inflows. The Securities and Exchange Board of India (Sebi) has reportedly recommended removing LTCG tax for foreign investors, a decision that rests with the government ahead of the February Budget.
Indian equities have demonstrated relative strength, outperforming major global indices since early October. This resilience, coupled with attractive valuations and moderating outflows from foreign institutional investors, suggests a potentially brighter outlook for the Indian market.
However, risks persist. Fluctuations in crude oil prices, despite a recent correction, remain a concern for India's economic stability. Additionally, the current tax structure, where foreign investors are taxed on rupee-denominated gains, can create liabilities even amidst dollar-denominated losses due to currency depreciation.
