The foreign portfolio investors (FPIs) have taken a step back in their investments by withdrawing about Rs 7,712 crore from their stake in the Indian market. The investors started divesting in Indian companies after Nirmala Sitharaman announced the 'super-rich' tax in her Budget 2019-20.
According to The Economic Times, the net investment in the capital market by the FPIs was about Rs 1,659 crore in July. The report adds that the positive net investment is because of the FPIs pumping in about Rs 9,371 crore in the debt segment at the same time when there was a massive withdrawal in July.
FPIs have shown sudden displeasure in the Indian market which had been major investors in the equity segment for the past five months. "FPIs have been on a selling spree ever since the government proposed 'super-rich' tax in its budget and with no respite in sight from the government, the quantum of net outflows shot up," said Himanshu Srivastava, senior analyst manager research at Morningstar.
The liquidity crisis in the country, tepid earning season, slower pace of GDP growth, irregular monsoon and the Asian Development Bank's forecast on the lowering growth are the other reasons that have created unfavourable conditions for the FPIs to invest in the Indian markets.
Some of the other reasons for the investment lags are related to the international tension between US-Iran which is creating global disruption in liquidity flow. The quarterly results also show a major dip in large scale Indian companies, which killing investor expectations, said Harsh Jain, COO at Grow.