Policy flip-flops on foreign investments make Japanese investors edgy

MUMBAI: The government’s recent policy flipflops relating to foreign investments in India has pushed not only the aggressive US and UK-based fund managers to do a rethink on their future India strategy, even Japanese investors, known for their conservative approach, are taking a second look at the emerging policy issues here.

Nippon Life Insurance, the largest life insurer in Asia that has “some investments” in India as an FII, is watching the developments in the country and its portfolio of stocks from here.

Yoshinobu Tsutsui, president, Nippon Life Insurance , told reporters in Tokyo that the life insurer has “some portfolio” investments in India through its overseas subsidiaries, and given the opportunities was willing to explore the FII opportunities in a much wider way.

“We have to also keep in mind the constantly evolving regulation relating to foreign investment in India,” Tsutsui said. “We are still in the midst of studying that situation from regulatory perspective ,” he said. Currently, Nippon Life, also called Nissay , manages over $650 billion in assets, with most of its investments in Japan.

The more-than-a-century old life insurer’s main investment in India is its 26% stake in Reliance Life Insurance , bought in March 2011. The company is also in the process of signing the final agreement for an equal amount of stake in Reliance Mutual Fund.

Both the companies are majority held by Anil Ambani-promoted Reliance Capital. Other than its Indian affiliate, Nippon Life also has presence in the US, UK and Singapore through its subsidiaries, and China and Thailand through affiliates.

Lately a large number of FIIs, mostly the ones that have been investing through countries that have favourable tax treaties with India, are treading cautiously on their India strategy .

The recent cautious steps on the part of FIIs are mainly because of the General Anti Avoidance Rule ( GAAR), a set of newly enacted legislation that aims to target those investors who are found to have used aggressive taxation methods to avoid paying taxes to the government.

As a result, since the Budget on March 16, FIIs have net sold stocks worth about Rs 1,000 crore, a sharp reversal compared to a net inflow of nearly Rs 43,000 crore since the beginning of the year and the Budget day.