Foreign portfolio investment falls to Rs 2,916 crore on high valuations, capital gains tax hike

New Delhi (India), July 27 (ANI): Net investment by foreign portfolio investors (FPIs) in the Indian equity market fell to Rs 2,916 crore in the week ended July 26 due to investors selling shares amid budget uncertainty.

According to data from the National Depository for Securities, foreign investors invested Rs 15,420 crore in Indian markets last week, but their purchases fell significantly in the week of July 22-26.

In July so far, net FPI investment in the equity market stood at Rs 33,688 crore. Total FPI investment this year has risen to Rs 1,39,010 crore.

“The Budget 2024-25 did not generate much excitement in the market, though it was both populist and cautious. The increase in taxes on short-term and long-term capital gains increased volatility on the budget day. While the government’s focus on fiscal discipline and growth is attractive, FIIs are cautious given the current high valuations and muted expectations for Q1 FY25 results,” said Vinod Nair, Head of Research, Geojit Financial Services.

He added, “Meanwhile, DIIs continue to adopt a ‘buy on dips’ strategy, which contributed to market gains on the last trading day of the week, especially in pharma, autos, metals, IT and FMCG sectors.” The volatility in FPI flows extends beyond India to other markets as well. Countries like Brazil, Indonesia, Malaysia, Philippines and South Korea saw FPI inflows this week, while markets in Taiwan, Thailand and Vietnam saw outflows.

“The market focus has quickly shifted from the Union Budget released this week to the ongoing Q1FY25 earnings season. The Union Budget for FY25 has struck a sensible balance between capital expenditure, fiscal prudence and prosperity. FPI flows are likely to remain volatile,” said Shrikant Chouhan, Head of Equity Research at Kotak Securities.

This year, the trend in foreign investment has been patchy. Foreign investors were net sellers in January, April and May, selling shares worth around Rs 60,000 crore in total. However, they became net buyers in February, March and June, with the total purchases amounting to Rs 63,200 crore. (ANI)