Expert Views: India to roll back higher surcharge on foreign portfolio investors

BENGALURU (Reuters) - The Indian government announced measures on Friday to revive economic growth and markets including the withdrawal of higher taxes for foreign portfolio investors (FPIs) and said it would release funds for bank recapitalisation upfront.

Finance Minister Nirmala Sitharaman told reporters the government had decided to withdraw the surcharge on FPIs which she had unveiled in her budget for the fiscal year ending March 2020.

COMMENTARY

RAJIV SINGH, CEO, KARVY STOCK BROKING, HYDERABAD

"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."

"Release of 700 billion rupees upfront for PSU banks and other major announcements for easing the crisis in NBFCs will help in credit offtake.

"The best part is (that) the 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 dose, I expect the market to form base around current levels and inflows will be witnessed in broader markets among quality mid-cap and small-cap stocks."

ABHIMANYU SOFAT, HEAD OF RESEARCH , IIFL SECURITIES, MUMBAI

"In addition to the expected withdrawal of surcharge on capital gain for domestic and FPIs, the incremental announcements will be taken positively by the markets. Especially, the GST refund and the faster payment of money stuck with government departments can help in improving the velocity of money. Additional fund for NHB will help ease pain for HFCs. Though some of the measures may not add much in terms of real impact but the fact that the finance minister promised another set of announcements in next two weeks is a big positive."

JAIRAJ PURANDARE, CHAIRMAN JMP ADVISORS, MUMBAI

"This is a welcome announcement which will bring the much-awaited relief for FPIs, and in turn, provide a boost to the equity markets."

"However, surcharge should still be applicable on capital gains from debt instruments, futures and options and other income such as interest. The amendment is proposed to be made effective from April 1, 2019 and appropriate notifications will be issued in this regard.

"While this announcement will have significant implications for FPIs, it will also be applicable to all domestic investors on short-term and long-term capital gains from above mentioned securities."

MADHUMITA GHOSH, DEAN AT TASMAC GLOBAL, MUMBAI

"Markets will move on this news on Monday. Getting foreign money is good for the economy. If there is higher FPI investment, it would help companies with raising funds and overseas expansion. In any case, interest rates are coming down, so corporates will go for raising funds. So, this is a very good step. It was a big chapter that was creating problems and now that has changed. The announcements about the auto sector are also welcome."

SUNIL DAMANIA, CHIEF INVESTMENT OFFICER, MARKETSMOJO.COM, MUMBAI

"The market was expecting some relief measures from the finance ministry and the finance minister did not disappoint. The measures announced by the FM like no surcharge on FPIs, faceless IT scrutiny going live by Oct. 1 and quicker GST refund to MSMEs among others will go a long way in terms of lifting sentiments. However, this is a job that's half done. There is a need for more such measures that can spur capex from the private sector."

VK VIJAYAKUMAR CHIEF INVESTMENT STRATEGIST AT GEOJIT FINANCIAL SERVICES, MUMBAI

"Withdrawal of the surcharge on FPIs is a shot in the arm for the sagging market. One can now expect a reversal of FPI selling. The market is likely to look up from now on. However, a sustained rally in the market will happen only when we have visibility on good earnings growth and a reversal of the slowdown in the economy. This requires more reforms. The finance minister has announced that she will come back with more reforms soon. So, there is hope."

MADHAVI ARORA, LEAD ECONOMIST AT EDELWEISS SECURITIES, MUMBAI

"Policymakers emphasised that they are keeping a watch on the wealth creators. In this context, the withdrawal of FPI and DII enhanced surcharge of long- and short-term gains are welcome move and would have a marginal fiscal impact of 14 billion rupees."

"The move to release 700 billion rupees of funds upfront to recapitalise public sector banks rather than phase out funds through the year will have a better multiplier effect for credit expansion.

"The government also re-emphasised that it is consulting with banks to encourage them to link their loan rates to the external benchmark, something that even the RBI had emphasised in the August policy."

SANDIP SABHARWAL, LOCAL FUND MANAGER, MUMBAI

"Removal of surcharge for all investors as well as upfront funding of PSU Banks is good. Measures on the auto sector are incrementally positive. However, we need to see if the GST council also moves on this."

OMKESHWAR SINGH, HEAD OF RANK MF, SAMCO SECURITIES, MUMBAI

"This was a much needed, detailed press conference amid different voices. The (surcharge) rollback will have a positive impact, and also shows that the government does listen to the industry and take appropriate corrective measures."

RUSMIK OZA, HEAD OF FUNDAMENTAL RESEARCH, KOTAK SECURITIES, MUMBAI

"Withdrawal of enhanced surcharge on FPI is a big positive for Indian markets as it could reverse the outflows seen since post-budget. It should also help INR appreciation. Overall, a good sentiment booster for the Indian economy."

AISHVARYA DADHEECH, FUND MANAGER, AMBIT ASSET MANAGEMENT, MUMBAI

"(In the) last one-and-a-half months, it was adverse sentiment that led to intense drawdown in the broader market. We believe this move will be taken very positively by the street as the overhang of an increase in tax incidence has been removed. It will also send the right signals to global market participants who are infused with ample liquidity."

(Reporting by Chris Thomas, Sachin Ravikumar, Derek Francis and Nivedita Bhattacharjee in Bengaluru; Editing by Subhranshu Sahu)