Key facts
- Foreign portfolio investors withdrew over Rs 62,800 crore from Indian equities in the first half of June.
- Outflows are attributed to geopolitical tensions, global growth concerns, and a weakening rupee.
- India has exempted foreign investors from its 12.5% capital gains tax.
- The exemption aims to attract more foreign capital amid external economic vulnerabilities.
- The Reserve Bank of India has introduced measures to support foreign inflows.
Foreign portfolio investors (FPIs) have withdrawn over Rs 62,800 crore from Indian equities in the first half of June. This significant outflow is attributed to a combination of geopolitical tensions, global growth concerns, and a weakening rupee. The scale of these withdrawals marks a notable increase compared to previous periods, indicating a shift in investor sentiment towards Indian markets.
In an effort to counter these outflows and attract foreign capital amidst prevailing external economic vulnerabilities, India has announced an exemption for foreign investors from its 12.5% capital gains tax. This measure is intended to make Indian markets more attractive to international investors. The Reserve Bank of India has also introduced additional measures aimed at supporting and encouraging foreign capital inflows into the country.
The exemption from capital gains tax is a strategic move by the Indian government to bolster foreign investment. This policy change seeks to mitigate the impact of global economic uncertainties and geopolitical risks that have been driving capital away from emerging markets. The Reserve Bank of India's supportive measures are expected to work in tandem with the tax exemption to stabilize and potentially increase foreign investment.