Mumbai: The risk aversion caused in the global markets amidst fears about China led global growth slowdown has led to foreign portfolio investors (FPI) pulling out Rs 16,000 crore from domestic equities in 2016 till date.
While the Union Budget to be unveiled on Monday is expected to set the tone for the markets in the coming days, market pundits believe that selling by foreign investors would continue until they see signs of revival in global economic growth.
“The China slowdown has impacted global investors sentiment towards the emerging markets. Even if the budget throws some positive surprises, selling would continue as global factors are having a major influence on investors sentiment at the moment” said, U.R Bhat, managing director, Dalton Capital Advisors.
Since, the markets have already priced in a potential reintroduction of Long Term Capital Gains Tax (LTCG) in the upcoming Budget, Mr Bhat believes the outflow of foreign funds would slowdown if the budget refrains from imposing LTCG on stock market transactions.
According to him, budget proposals regarding public investment in critical projects and their execution would be one of the major factors that foreign investors would be looking forward to in the budget apart from specific tax proposals like LTCG and dividend distribution tax (DDT).
