Foreign flows into India drying up: Macquarie

FII taxation controversy, macro challenges key reasons for FII drying up

Flows into India are likely to remain limited in the near term, as relative valuations of stocks versus emerging markets do not look attractive, Macquarie says.

India thus "may be staring at possible negative 12 month forward returns," Macquarie says.

The controversy over taxation for foreign investors, as well as macro challenges, are key reasons for net outflows of foreign institutional investors in April vs strong Jan-March inflows, Macquarie says.

Indian stocks look historically cheap, but is trading at a premium of around 33% vs emerging markets vs the long-term average of 27%, Macquarie estimates.

Nifty is seen trading in 5,000 to 5,500 range and the Sensex in 16,000 to 18,000 range, as "global liquidity glut" to provide some support, Macquarie says.