Foreign investors dumped domestic equities worth over Rs 5,200 crore in April so far because of concerns over tweaks in India’s tax treaty with Mauritius, which would now impose higher scrutiny on investments made here via the island nation.
This came following a staggering net investment of Rs 35,098 crore in March and Rs 1,539 crore in February, data with the depositories showed.
According to the data, foreign portfolio investors (FPIs) made a net outflow of Rs 5,254 crore in Indian equities this month (till April 19).
The major trigger for FPI selling was the tweak in India’s tax treaty with Mauritius, which would now impose higher scrutiny on investments made in India via the island nation, Himanshu Srivastava, associate director and research manager of Morningstar Investment Research India, said.
The two nations have reached a consensus on a protocol amending a double taxation avoidance agreement (DTAA). The protocol specifies that tax relief cannot be utilised for the indirect advantage of residents from another country. Most of the investors investing through Mauritius entities in Indian markets are from other countries, he added.
Additionally, hotter-than-expected US inflation and the consequent spike in bond yield (the 10-year rising above 4.6 per cent) led to big selling in the Indian market, V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, said.
