Modi’s budget holds key to burnish outlook for India stock flows

Foreign investors’ renewed interest in Indian equities faces a big test as Indian Prime Minister Narendra Modi’s government prepares to present the federal budget. Investors say the first stock inflows from overseas in more than a month could accelerate if the February 1 budget unveils steps to boost spending to stimulate growth that’s forecast to slow to a three-year low. On the other hand, a move to end a tax break on equity gains or a levy on foreigners will once again sour the sentiment for India just when the markets are facing uncertainties over Brexit and US President Donald Trump’s economic policies. “The market has a limited appetite for surprises,” said Mihir Vora, who helps oversee about $6 billion as chief investment officer at Max Life Insurance Co. “We’ve withstood demonetisation and other unanticipated events such as a new policy regime in the US. Any changes in tax treatment or rules for foreign investors will impact sentiment.” Global funds last week bought $101 million of shares amid signs the cash crunch from Modi’s shock currency ban is easing, and as the government put on hold a proposal to tax indirect transfers of assets held by foreign investors. The inflows follow $4.3 billion of withdrawals since November, the highest among eight Asian markets tracked by Bloomberg. (Ameya Karve and Nupur Acharya/Bloomberg)