US top FII provider to India
The United States of America (USA) has toppled Mauritius to become the top jurisdiction from where India is receiving the highest amount of foreign portfolio investment (FPI) into the equity markets.
Mauritius lost out due to the uncertainty over the double tax avoidance treaty (DTAA) between India and Mauritius and constant threat of them being reviewed.
According to data available with the Securities and Exchange Board India (Sebi), total investment made by fund managers originating from USA accounted for 32.47 per cent of the total portfolio investment in the country. “The US tax laws have become tighter and their disclosure requirements have been strengthened. This is the reason why many fund managers are now preferring to invest in the Indian market directly from the US instead of coming through the Mauritius route,” said U.R. Bhat, managing director, Dalton Capital Advisors. According to him, a lot of exchange traded funds (ETF) and long only funds based out of the US are investing heavily in the Indian market.
“While the fund’s origin is in US, these are typically international finds with their investors coming from different parts of the world,” he added.
“No one wants to be on the wrong side of the government. Every now and then, there were rumours saying that the double tax avoidance treaty (DTAA) between India and Mauritius would be reviewed. This has caused lot of uncertainty among the global investors wanting to invest through the Mauritius route,” said Ambareesh Baliga, a veteran market expert.
According to Sebi data, India has received a total portfolio investment to the tune of Rs 21.32 lakh crore till February, 2015 out of which US-based fund managers have pumped in a record Rs 6.92 lakh crore into domestic equities. This is when compared to Rs 4.75 lakh crores of investment made by Mauritius based fund managers.
