Foreign Portfolio Investors (FPIs) have net sold in the cash market to the tune of nearly Rs 20,500 crores. since July 1.
They net sold in the cash market to the tune of Rs 16,870 crores in July and in August in the first two days of trading they have net sold to the tune of Rs 3,944 crores.
One of the major reasons for the sell-off by FPIs has been the levy of surcharge on the super rich levied in the Union Budget 2019-20. FPIs structured as trusts would have to either end-up paying the surcharge or restructure themselves as corporates. According to reports around 40 per cent of the FPIs may end-up paying a surcharge.
There are reports that the government may now consider withdrawing the surcharge altogether or tweaking the same. There are also reports that the government is looking at the possibility of ring fencing the FPIs against the surcharge.
Should this step be considered we might see better inflows into the Indian markets and also some recovery in stocks. The markets have lost nearly 7 per cent since the declaration of the Union Budget. The fall has largely been on account of heavy selling by FPIs.