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Last Updated : Aug 23, 2019 10:02 PM IST | Source: Moneycontrol.com

FM withdraws surcharge on FPIs and domestic investors: Analysts feel market set for strong run

VK Vijayakumar of Geojit Financial Services said withdrawal of the surcharge on FPIs is a shot in the arm for D-Street.

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With Finance Minister Nirmala Sitharaman announcing withdrawal of surcharge on foreign portfolio investors, analysts are confident that this will provide the market with a much-needed boost.

"Withdrawal of enhanced surcharge on FPI is a big positive for Indian markets as it could reverse the outflows seen since post-Budget," Rusmik Oza, Head of Fundamental Research at Kotak Securities, told Moneycontrol.

He added the announcement should also help rupee appreciation .

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Sensex lost more than 7 percent and more than Rs 14 lakh crore wealth eroded since the announcement of additional surcharge on FPIs registered as trusts and domestic investors.

FIIs also have been net sellers since Budget, pulling out more than Rs 25,000 crore though domestic institutional investors remained supportive during that period.

"In order to encourage investment in capital market, it is decided to withdraw enhanced surcharge on FPIs. Surcharge on domestic investors in equity also goes. Pre-budget position is restored," said Nirmala Sitharaman told reporters.

The approximate revenue implication due to removal of surchange on FPIs and domestic investors will be around Rs 1,400 crore, said Revenue Secretary Ajay Bhushan Pandey, adding the government will keep that tax at pre-budget levels.

Experts believe this could definitely have positive implications on the market and help in reversal of FPI outflow.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services also agreed with Oza, saying withdrawal of the surcharge on FPIs is a shot in the arm for the sagging market.

One can now expect reversal of the FPI selling and the market is likely to look up from now on, he feels.

"However, sustained rally in the market will happen only when we have visibility on good earnings growth and reversal of the slowdown under way in the economy. This requires more reforms. The FM has announced that she will come back with more reforms soon. So, there is hope," he said.

According to, Vinod Nair, Head Of Research at Geojit Financial Services, this is likely to restore some confidence in the market.

FPIs were selling given the risk-off mode in the global market which had enhanced in India due to higher surcharge post budget, and that could be reversed to a good level in culmination of other supportive measures like recapitalization of PSBs, transmission of rate cut and Auto, he said.

The finance minister in the budget on July 5 had proposed a higher tax surcharge - from 15 percent to 25 percent for incomes between Rs 2 crore and Rs 5 crore, and from 15 percent to 37 percent for higher incomes on non-corporate FPIs.

Here is what other experts say about FPI surcharge withdrawal impact:

Rajiv Singh, CEO, Karvy Stock Broking

The Finance Minister has undone most of the damages caused by her maiden Budget speech by rolling back the surcharge on FPIs and domestic investors. This is a welcome step and markets are expected to cheer for it. Release of Rs 70000 crore upfront for the PSU banks and other major announcements for easing crisis in NBFCs will help in credit off take.

The best part is, FM is now open to act on Industry feedback and has promised to announce a few more stimulus measures in the coming weeks.

After this much awaited booster doze, I expect market to form base around current level and inflows will be witnessed in broader markets among quality mid cap & small cap stocks. We may witness rally in the favorite stocks of FIIs which majorly constitute our benchmark Index.

Garima Kapoor, Economist, Elara Capital

The main takeaway of today’s announcements by the Finance Minister is that they are aimed at restoring confidence and tackle the challenges of weak demand.

Withdrawal of surcharge on FPIs and domestic investors would help in alleviating the tax burden on investors in capital markets. Likewise, quicker transmission of rate cuts, faster recapitalisation of banks and external benchmarking of rates are likely to aid credit off take.

Most importantly, recognition of issues in the economy and the measures to address them is itself a positive signal and will help to ease concerns on growth slowdown.”

Amit Gupta, Co-Founder and CEO TradingBells

These are just the kind of measures which were required to boost the economy. In the immediate term, we can expect the markets to bounce back on Monday with a gap up opening, and continue the rally for a few sessions to come. With the stimulus to FPI taxation, we can expect this FII outflow trend to reverse in the immediate term.

Basant Maheshwari of BM Health Advisors (told CNBC-TV18)

It is a phenomenal announcement from FM and if she played the card well, then there could be a definite boost to economy and the party could continue going ahead.

He expects 11,000 on the Nifty on Monday and bears could get slaughtered. But the follow-up rally will depend on economic growth and global factors like US-China trade war.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Aug 23, 2019 07:07 pm
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