- India's tax and holding-structure rules have deterred foreign investors, says DAM Capital CEO
- Foreign institutional investors withdrew a record Rs 1.58 lakh crore in 2025
- Investors seek clarity, predictability, and freedom in building stock positions in India
India has “not treated foreign investors well” on taxes and holding‑structure rules, and that is one reason FIIs have stayed away, says Dharmesh Mehta, MD and CEO, DAM Capital Advisors.
He said investors want clarity, predictability and freedom in how they build positions, and India must decide “how India treats them” if it wants them back.
Foreign institutional investors pulled out a record Rs 1.58 lakh crore from Indian equities in 2025 and remain net sellers in 2026 so far. As of 6 February, FIIs are still net negative by about Rs 38,000 crore, despite a few recent sessions of net buying.
Mehta said the policy environment needs correction. “I'm very positive that the FIIs will come back to India. It's just how India treats them, how India wants them. Unfortunately, we've not treated them well with the taxes and changes and the changes on the holding structure that you need to diversify your stocks.” He questioned rules that force investors to hold 10 to 20 stocks instead of taking concentrated positions.
“If somebody wants to own an HDFC Bank, why can't he own it?”
He said the government has taken note and expects corrective action soon. “I believe some action will happen very soon.”
Mehta argued that long term investors will ultimately return because the underlying India story continues to strengthen. “Where do you go? For me this is the best. India's golden decade, as they call it. That's what is happening to India today.” He said quarterly market swings should not distract from the structural shift. “Let's not worry about one quarter, two quarter. Stocks will underperform or they'll go overvalued, but the long term story is intact.”
On manufacturing, he said the momentum is real. “For the first time we're seeing this kind of boom happening from the last two or three years.” He pointed to firms like Sirma Technologies that are experiencing growth “nobody can even think of.” India, he said, is on the cusp of change and three to five year investors will do well.
He added that global capital also chases opportunity. Referring to aggressive global traders like Jane Street, he said, “Sometimes they get what they deserve. There are multiple other FIIs. We don't want the Janes of the world. You want the other guys.”
But he defended their actions. “They've just taken a market opportunity.”
