Indian equities back on foreign investors' radar after stimulus package

Bloomberg Singapore | Updated on August 27, 2019

Limited inflows are likely as the investors navigate through escalating trade tension that has roiled the financial markets.


Foreign investors may be lured back to Indian equities after the government scrapped a tax on overseas funds while rolling out measures to boost economic growth.

Singapore-based Taurus Wealth Advisors Pte., for one, is adding exposure to Indian equities and funds on a tactical basis, according to Rainer Michael Preiss, a strategist at the company, citing government measures unveiled on August 23. After a rather disappointing few months, Indian equities could benefit from renewed government support and market friendly policies.

Read more: Will the removal of surcharge on FPI capital gains help stock market?

Eastspring Investments Singapore Ltd., which added to Indian equities a few weeks back, is now looking to increase the size of its positions. The policy makers are taking the slowdown and portfolio flows seriously, so expect more, said Colin Graham, chief investment office of multi asset solutions at Eastspring in Singapore.

Also read: Govt to infuse Rs 70,000 cr into state-owned banks

Stimulus package

The benchmark stock index today extended gains by as much as 0.5 per cent from Monday’s steepest advance in three months. Finance Minister Nirmala Sitharaman late Friday rolled back an additional levy on foreign funds and said the administration will immediately inject ₹70,000 crore ($9.8 billion) of fresh capital into its struggling state banks. Lenders vowed to pass on policy-rate cuts to their customers and Sitharaman promised to unveil more steps over coming weeks, including for the property sector.

The Reserve Bank of India on Monday approved a record ₹1.76 lakh crore to the central government, boosting the coffers at a time when it is under pressure to provide fiscal stimulus to the slowing economy. Indian stocks have lost about $300 billion in market value as foreigners dumped more than $3 billion worth of shares since the July 5 budget, which released an additional tax on some foreign funds but lacked measures to boost the economy.

Nomura Holdings Inc. on Monday upgraded India stocks to overweight from neutral in its Asia-excluding-Japan allocation, citing the governments moves to boost the economy as well as recent declines in equities. The S&P BSE Sensex Index fell 8 per cent after July 5 budget was unveiled and last Friday’s close.

Still, global funds were net sellers of $104 million on Monday, according to provisional data from exchanges, even as the Sensex index climbed. Foreign inflows may be limited as they navigate through escalating trade tension between the U.S. and China that has roiled financial markets.


Published on August 27, 2019

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