Foreign Investors Withdraw ₹10,000 Crore from Indian Stock Market Post-Budget
Foreign portfolio investors (FPIs) have withdrawn nearly ₹10,710 crore from the Indian stock market over three days following the Union Budget, which introduced higher taxes on derivatives trades and capital gains from equity investments. According to stock exchange data, FPIs sold equities worth ₹2,975 crore on July 23, ₹5,130 crore on July 24, and ₹2,605 crore on July 25. In contrast, domestic institutional investors (DIIs) bought stocks worth approximately ₹6,900 crore during the same period.
Prior to the Budget, FPIs had purchased equities worth around ₹18,000 crore between July 12 and 22, anticipating significant reform measures. However, Finance Minister Nirmala Sitharaman’s Budget announcement included major changes to the capital gains tax, introducing a uniform 12.5% tax rate on long-term capital gains (LTCG) for all asset classes, affecting both residents and non-residents.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted the erratic nature of FPI flows compared to the consistent growth of DII flows. He emphasized that while DIIs have been steady buyers throughout 2024, FPIs have fluctuated between buying and selling, reflecting their unpredictable investment patterns.
A report from Nishith Desai Associates highlighted that while the simplification of the capital gains regime is generally positive, non-resident investors will face a higher LTCG tax rate. For FPIs, the tax rate on listed securities increased from 10% to 12.5% for LTCG and from 15% to 20% for short-term capital gains (STCG).
