An Electronic Ticker Board Indicates Prices of the BSE Sensex at the Bombay Stock Exchange (Photographer: Prashanth Vishwanathan/Bloomberg)

Foreign Inflows Will Resume Once Macro Situation Stabilises, Says Hemendra Kothari

India’s macro situation is a matter of concern, but it can create buying opportunities as markets tend to overreact to some of these.

That’s according to investment banker and DSP BlackRock Investment Managers Chairman Hemendra Kothari.

“The government needs to keep the current account and fiscal deficit under control and for that it is possible that interest rates may move upwards to keep inflation under control. Also, there is election next year. Keeping all these in mind, equity will remain a long-term investment,” Kothari told BloombergQuint.

Foreign investors will look at India based on how the government manages the macro situation. They have pulled out $4 billion (over Rs 26,700 crore) from capital markets (equity and debt) so far this month, primarily due to a surge in global crude prices and a rise in yields of government securities here. This comes after foreign investors had taken out more than Rs 15,500 crore from capital markets in April, the steepest outflow in 16 months.

Overseas funds are not investing here, instead they have withdrawn money. But a stage will come when the macro situation will be stable, and then I think money will come back again into India
Hemendra Kothari, Chairman, DSP BlackRock Investment Managers 

Long-Term Capital Gains Tax Shadow

There is a 10 percent tax on capital gains made on the sale of listed equity shares exceeding Rs 1 lakh and sold after a year of purchase, effective April 1.

Foreigners are not used to having taxes in many places. If growth in India sustains, overseas investors may come forward. But there are some other countries which are also doing well. So, India is not the only place where they can invest, according to Kothari. “If that (the tax) disappears next year, it can have a better reaction on markets.”

Tinkering with the tax structure affects investors’ psychology, according to Kothari. “Our government that way is quite understanding and am sure they will correct some things.”

The S&P BSE Sensex Index has gained 42 percent since the Narendra Modi-government took charge at the Centre on May 26, 2014.

BlackRock Stake

The DSP Group, which along with Blackrock, had assets under management of over Rs 1.1 lakh crore as on April 30, 2018, recently announced that it will buy BlackRock’s minority stake in the joint venture.

The decision was amicable and was taken to ensure that DSP Group maintains its majority stake in the venture, Kothari said. “Having a partner and not having one has its advantages and disadvantages. We would like to utilise the advantage part over here.”