1) Pressure from FPIs
The government has ended tax relief for foreign portfolio investors (FPIs) from Mauritius. The amendment introduces a Principle Purpose Test (PPT) aimed at curbing treaty abuse by taxpayers. Mauritius is the fourth-largest source of FDI in India and owns about 6% of total FPI assets in the country.
2. US inflation
A hotter-than-expected inflation data in the US has faded hopes that Fed would cut interest rates as early as June. Fed minutes also showed that officials had begun worrying that the current policy rate was not restrictive enough.
3. Bond yields
The hotter-than-expected US inflation has spiked the US bond yields. The two-year US yield topped 5% for the first time since November. 10-year yield hit a five-month high. Higher yields are negative for FPI inflows but analysts suggest that dips may get bought as domestic liquidity remains high.
4. Valuations
Since the markets are at an all-time high, many investors have turned cautious on valuations and are holding off new investments.
5. Profit booking
A lot of investors have been booking profits and tweaking portfolios in this leg of the bull run.
6. Rising commodity prices
Prices of gold, silver, zinc, copper, cocoa and coffee are on an uptrend. As per experts, rising commodities means rising inflation – if inflation is high, interest rates will be hiked. As per Apurva Sheth of Samco -This will lead to higher borrowing costs and low profits. and can lead to falling stock prices.
