Why US 4% Bond Yields Attract FIIs Over India's 12% Returns: The Real Reason for Outflows
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FII Exodus: Why India's 12% Return Loses to US 4% Bond Yield
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News18•16-03-2026, 20:45
FII Exodus: Why India's 12% Return Loses to US 4% Bond Yield
•India's nominal 12% stock market return often reduces to ~2% for Foreign Institutional Investors (FIIs) after taxes, currency depreciation, and other costs.
•Taxes, including ~20% short-term and ~12.5% long-term capital gains, plus ~20% dividend withholding tax, significantly cut into gross earnings.
•Annual Rupee depreciation of 3-4% against the dollar is a major risk, eroding dollar-denominated profits for foreign investors.
•Hedging costs (3-4%) and other fees (0.5-1%) further diminish the net return, making risky Indian investments less appealing than safe 4% US bonds.
•Experts like Ray Dalio and Aswath Damodaran highlight the importance of real returns, currency stability, and country risk in emerging markets.
