'Today, there is no easy money to be made after the run-up in equities.'
While the amount collected is a tad lower than last two years, it may surpass the previous two years' collections by the end of the year.
To get same tax treatment as FIIs; rules on search & seizure and consent settlement cleared
Equity markets braved all odds this fiscal and rewarded investors with high returns as the benchmark Sensex surged more than 66 per cent despite COVID-led disruptions and concerns over its impact on the economy. Market analysts termed FY 2020-21 as a roller coaster ride for not only Indian markets but also for equity indices globally due to the pandemic. In an unprecedented come back, the 30-share BSE Sensex has jumped 19,540.01 points or 66.30 per cent so far this fiscal. This extraordinary rally holds significance as markets faced volatile trends this fiscal.
Companies in the small-cap universe are having a dream run - the Nifty Smallcap 100 index has shot up more than 25 per cent on a year-to-date basis, even as the benchmark Nifty is up 7 per cent. This is the best start for the index since 2017 when the Nifty Smallcap 100 index surged 32.3 per cent between January 1 and May 10. However, in terms of outperformance to the Nifty, this year's performance is the best in more than a decade. A combination of sectoral tailwinds and lack of institutional selling pressure has helped small companies escape from the correction triggered by the second wave of Covid-19.
The coming Union Budget might give relief to foreign portfolio investors from taxation on indirect transfers.
'The Indian economy is in slowdown and growth may stay slow,' notes Devangshu Datta.
Besides, the quantum of FPI investments via P-notes dropped to 3.5 per cent during the period under review from 3.8 per cent in the preceding month.
The move will increase working capital requirement for brokers, raise the work load on the system and will leave little room for contingencies.
The investors had pumped in a net sum of Rs 2,965.66 crore on February 11, the second-highest single-day inflow so far this month.
The Budget has relaxed a few safe harbour rules that aim to make it easier for fund managers overseeing offshore India-focused funds to relocate to the country.
The quantum of FPI investments via P-notes remain unchanged at 6.6 per cent in March.
Swiss brokerage UBS joins European banking peer HSBC in shutting down its offshore derivative business
FPIs' ownership in NSE-listed companies reached a five-year high of 22.74 per cent in December 2020 on the back of huge net inflow of Rs 1.42 lakh crore by such investors in the third quarter.
If net forex outflows turn out to be relatively high in the next few years, the rupee could depreciate beyond Rs 80 to a dollar by 2022. The causal reasons could, for example, include unmet expectations of FPI and FDI investors about the performance of the Indian economy, sharp rise in prices of imported oil and decrease in FX remittances. The RBI has to ask itself whether guaranteeing future rupee-dollar exchange rates on FX forward contracts is a reasonable way to use its risk-bearing capacity, says Jaimini Bhagwati.
Experts say foreign investor sentiment was bolstered by the US Federal Reserve's decision to go slow with interest rate hikes and hopes of political stability.
The 30-share Sensex also hit its one-year low of 22,494.61 on February 29 this year.
This flight of capital began in early August due to risk-aversion created first by rising geopolitical tensions due to North Korean aggression and second by the US Fed's decision to shrink its balance sheet
The new PN3 norms and lack of clarity on what constitutes beneficial ownership are the primary reasons for the decline in investments from China and Hong Kong.
Foreign investors, according to them, will now wait-and-watch how the economy takes shape in the backdrop of doubts over monsoon, interest rate trajectory and other global events such as the US - China trade war.
'There is a weak link between the economy and the stock market.'
Despite a temporary relief, foreign investors still see the sword of double-taxation hanging above their hard earned returns.
It does feel like we are close to the end of the rupee's rally, says Jamal Mecklai.
A key trigger for the increased retail participation in equities has been the lockdown triggered by Covid-19 that saw investors channelising their savings to capital markets in search of better return on their investments and the need to increase their disposable income.
Lok Sabha passed the Finance Bill, after approving more than two dozen official amendments, by voice vote, thus completing the Budgetary exercise for 2019-20 in the Lower House.
However, a net amount of Rs 11,119 crore was withdrawn from the debt segment during the same period. This translated into a net investment of Rs 1,003 crore.
Equity investors grew richer by Rs 32.49 lakh crore in 2020 on the back of smart returns in the stock market which had a roller-coaster ride during the year hit by the coronavirus pandemic. The COVID-19 outbreak ravaged lives and livelihoods on a global scale, shuttering businesses and jolting world equities. But amid all the gloom, Indian stock indices gave hope of returning to winning ways towards the latter part of the year.
The Reserve Bank of India (RBI) is precariously balancing two opposing objectives - maintaining easy financial condition in the domestic market, while ensuring external stability - and economists have started taking note. They say India is going through the classic trilemma of the 'Impossible Trinity'. The RBI cannot have an independent monetary policy (setting domestic interest rates) in an environment of an open capital account and flexible exchange rates. What is even more complicated for the central bank now is that financial market stability overlays all the other three objectives.
With most Adani Group shares locked in lower-circuit in early morning trade based on news that accounts of three foreign portfolio investors, heavily invested into group companies, were frozen by the National Security Depository Limited, market experts advise caution that investors should not jump in now to buy at lower levels.
'In the short term, we may see some disruptions due to Covid, but in the medium-to-long term, we should keep an eye on US inflation and 10-year bond yields.'
FY22 will be the year to rebuild with the IMF projecting output growth at 11.5 per cent, economic survey at 11.0 per cent and the RBI's Monetary Policy Committee at 10.5 per cent.
New regime places more limits on unregulated foreign entities
India's sovereign credit ratings do not reflect the economy's fundamentals, the Economic Survey said on Friday and nudged the global agencies to become more transparent and less subjective in their ratings. The Economic Survey 2020-21, tabled in Parliament, said that sovereign credit ratings methodology must be amended to reflect economies' ability and willingness to pay their debt obligations, and suggested that developing economies must come together to address this bias and subjectivity inherent in sovereign credit ratings methodology. "Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated as the lowest rung of the investment-grade (BBB-/Baa3). While sovereign credit ratings do not reflect the Indian economy's fundamentals, noisy, opaque and biased credit ratings damage FPI flows," the survey said.
Brokerage firm CLSA says in its interactions with government officials, measures such as the dollar-deposit scheme were under consideration.
This follows a staggering inflow of Rs 19,967 cr in equities and debt last month
The threshold for identification of BOs of FPIs on controlling ownership interest is 25 per cent in case of companies and 15 per cent in case of partnership firms
'Quality of management, corporate governance, allocation of capital, full disclosures should form the basis to decide investing in a particular stock.'
Concerns over economic slowdown, muted earnings, crisis in the auto industry and global trade issues have been weighing on investor sentiment, experts said.
There is polarisation among sectors with IT and healthcare receiving the lion's share of FPI money in the past two quarters.
Overall market benchmark Sensex is headed for its worst performance in four years with a decline of 1,650 points
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