FPIs Withdraw Billions $ Amid India- Mauritius Tax Treaty Concerns

Analysts have observed a shift in foreign portfolio investors’ (FPIs) sentiment towards Indian equities and the debt market, as concerns about the India-Mauritius tax treaty have led to caution among investors.

In April, FPIs withdrew approximately $813 million from Indian equities and approximately $1.4 billion from the debt market, according to official data from depositories.

The recent outflow comes after a positive trend in March and February, when FPIs infused approximately $4.9 billion and approximately $213 million into Indian equities, respectively.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that the increase in US bond yields, currently standing at around 4.7 percent, has been a significant factor driving FPIs to pull out of Indian markets.

Himanshu Srivastava, Associate Director at Morningstar Investment Research India, pointed out that the revision of the India-Mauritius tax treaty, along with global market uncertainties and rising commodity prices, has influenced FPIs’ decisions.

Additionally, the surging retail inflation in the US has dashed hopes of a rate cut by the US Federal Reserve, leading investors to adopt a wait-and-see approach.

Prior to April, FPIs had shown confidence in the Indian debt market, with substantial investments in March, February, and January.

This was attributed to the inclusion of Indian government bonds in the JP Morgan Index, scheduled for the year.

However, recent developments have led to a cautious stance from foreign investors, signaling a shift in their investment strategy in the Indian markets.

Source: abp Live