India Inc's cash pile was up 13.8 per cent last fiscal year, thanks to a combination of higher profits in sectors such as IT and fund raising by top companies such a Reliance Industries, Bharti Airtel and Tata Motors, among others.
Mutual funds (MFs) are set to be net sellers of Indian equities for the first time in the past seven financial years, having sold stocks worth about Rs 1.27 trillion so far in 2020-21 (FY21), making it the highest net sales on record in a financial year. MFs had been net buyers in the previous six financial years, including purchases of over Rs 1.41 trillion in FY18, Rs 88,152 crore in FY19, and Rs 91,814 crore in FY20. The last time they offloaded Indian equities was in FY14, when they net sold stocks worth Rs 21,159 crore. In contrast, foreign portfolio investors (FPIs) have ramped up buying in FY21, purchasing more than Rs 2.6 trillion worth of shares.
Sebi has asked intermediaries to stagger the offerings as much as possible, said people in the know and ensure adequate capacity building.
Ultra-long term equity investments have been a lot more rewarding than debt, a study published by Credit Suisse Research Institute in collaboration with London Business School shows. "Over the last 121 years, global equities have provided an annualised real return (in dollar terms) of 5.3 per cent versus 2.1 per cent for bonds," shows the study, which has looked at returns for 23 countries since 1900. In the Indian context, equity returns are even more favourable. Since 1953, equities have generated annualised returns of 6.5 per cent and government bonds only 0.4 per cent.
The regulator typically meets overseas investors in the US and UK in the first half of a financial year, and had opted for a virtual meet last year too.
Tata group companies have outperformed the broader market over the past four years, under the chairmanship of N Chandrasekaran. However, the group's fortunes rely heavily on the performance of Tata Consultancy Services (TCS) now, as compared to the past. The combined market capitalisation of the group's listed companies has nearly doubled in the last four years, against a 77 per cent rally in the benchmark Sensex during the period. The overall market value of 16 key group firms - excluding listed subsidiaries of such entities - stood at Rs 16.8 trillion as of Friday. This was close to 2x the Rs 8.45 trillion as of February 21, 2017 - the day Chandrasekaran took charge as chairman of Tata Sons.
India Inc's quarterly net profit reached a record high of Rs 1.64 trillion in the third quarter ended December 31, 2020, mainly due to gains from higher commodity prices and a big swing in banks' earnings. The combined net profit of 3,323 listed companies that have declared results so far was up 68.6 per cent year-on-year (YoY). In comparison, earnings were up six times (534 per cent) in the second quarter and 6.5 per cent in the corresponding period last year.
As per the Budget proposals, migration of a fund to a fund in IFSC will not be regarded as transfer if done on or before March 31, 2023. Transfer of units will be tax neutral. Grandfathered investments of the fund to continue to enjoy capital gains exemption on future sale by the IFSC fund. There is no impact on carry forward of losses for the investee company.
The combined net sales of 42 listed construction and capital goods companies that have declared their third-quarter results so far were down 2.3 per cent year-on-year in Q3FY21 while core operating profit was up just 4.9 per cent YoY during the quarter.
Companies wanting to consider treaty benefits and deducting tax at a lower rate will have to examine the qualitative factors. They will have to consider whether FPIs are liable to tax and whether they are the beneficial owner of dividend income.
While the market may remain volatile this year, analysts expect equities to deliver positive returns by outperforming inflation and government bonds, supported by the fiscal stimulus in the US.
Market cap of government companies has remained unchanged in the past 8 years.
'Rationalising TDS on dividends for FPIs to reduce it to treaty rates ranging from 5 to 15 per cent, depending on the country of residence of FPIs from current rate of 20 per cent will provide a big cash flow relief for FPIs.'
Market participants are hoping for a few tweaks on the taxation front which will encourage consumers and businesses to spend.
'If an investor is ready to stay put for the next five years, one can consider investing in mid- and small-cap funds, but through SIPs.'
Last year's Budget had created uncertainty about the quantum of tax to be withheld on dividends paid to non-residents, as the exact tax rate was not specified under section 195.
BSE-listed companies' market capitalisation reached Rs 197.7 trillion on January 21, against India's nominal GDP of Rs 190 trillion during 12 months ended December 2020.
Outflows are likely to continue, experts say, till such time as the markets see a significant correction.
Over the three-month period, Airtel's stock price has rallied from Rs 432 to Rs 540, while Vodafone Idea has risen from Rs 9.2 to Rs 11.8 per share.
Equities in India saw record FPI inflows of $16.8 billion in November and December, taking the benchmark indices to new highs.
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