FIIs infuse Rs 876 cr in equities on hopes of GAAR revision

New Delhi: Overseas investors infused Rs 876 crore into Indian equity markets in the first week of May on hopes the government may review the General Anti Avoidance Rule (GAAR) provisions in coming days to address most of the concerns of FIIs, say experts.

Foreign institutional investors (FIIs) had pulled out over Rs 1,100 crore from equity markets last month due to fears that proposed GAAR provisions could lead to heavy tax burden for investors putting money through tax-friendly places like Mauritius.

[caption id=“attachment_300650” align=“alignleft” width=“380” caption=“During the current month, foreign fund houses poured in Rs 876.10 crore in the stock market and Rs 748.10 crore in the debt market Reuters”]  [/caption]

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FIIs made gross purchase of equities worth Rs 6,716.50 crore and sold shares valued Rs 5,840.40 crore translating into a net inflow of Rs 876.10 crore during May 2-4, according

to the data available with the market regulator Sebi.

Market experts said there is widespread expectations that government may review GAAR (General Anti Avoidance Rule) provisions in the coming days. The revision expected to

address most of the concerns of the FIIs. However, last month FIIs pulled out Rs 1,109 crore after investing a hefty sum of Rs 43,951 crore the first three months of 2012.

This was the first instance of monthly net outflows by FIIs since November 2011. Last month’s withdrawal was attributed by marketmen to a host of factors including government’s GAAR proposal announced in the Budget which has been the real dampener for several FIIs whose clients had used participatory-notes to invest in the Indian stock market.

The sentiment was further soured by ratings agency S&P’s move to lower India’s outlook to negative from stable, citing slow progress on its fiscal situation and deteriorating economic situation, experts added.

During the current month, foreign fund houses poured in Rs 876.10 crore in the stock market and Rs 748.10 crore in the debt market, taking the collective net inflow by FIIs in

stocks and bonds to 1624.20 crore. The BSE barometer Sensex has fallen 320.11 points, or

1.87 percent on the last trading session to close at 16,831.08 points. With the latest inflows, FIIs investment reached to Rs 43,717.70 crore into the equity market so far this year and Rs 16,358.60 crore into the debt market during the same period. FII pulled out over Rs 2,700 crore from the equity market in 2011 calender year.

PTI