Foreign portfolio investors (FPIs) have invested a net amount of Rs 49,553 crore in Indian markets in the month of November so far in the wake of high liquidity coupled with improving global indicators as well as clarity following the US presidential elections.
FPIs pumped in Rs 44,378 crore in equities and Rs 5,175 crore in the debt segment, taking the total net investment to Rs 49,553 crore between November 3-20. Foreign investors had brought in a net sum of Rs 22,033 crore in October.
Talking about what is driving the FPI investment in Indian markets, Harsh Jain, Co-founder and COO at Groww, told PTI that high liquidity, coupled with improving global economic indicators and clarity about the US presidential election outcome, worked in favour of India markets.
In addition, “with global trade improving and economies world over showing green shoots, investors are becoming more comfortable in investing in emerging markets like India,” he said.
Echoing his views, Rusmik Oza, Executive VP and head of fundamental research-PCG, Kotak Securities Ltd, said the (FPI) flows accelerated after the US election results as investors globally expect the dollar to weaken further in the future.
“It is expected that the Federal Reserve and other central banks like ECB and BoE would have to take more monetary measures to combat the second wave of COVID. This would lead to more liquidity infusion into global markets,” Oza added.
Making a comparison between other emerging markets, Rusmik Oza said FPI flows in South Korea and Taiwan are closer to what India has received.
“Interestingly, China after seeing very strong flows in the previous two months saw net outflows of $16.5 billion this month to date,” Oza added.
Regarding the future of FPI flows, he said expectations of a weaker dollar and high liquidity are likely to bring more inflows into emerging markets and India is one of the preferred markets in this space.
Factors like a higher-than-expected jump in earnings, faster recovery on the ground, and stable currency in India are also helping FPI inflows.
FPIs have been net buyers in the Indian equity markets for almost all trading sessions barring a few in November, noted Himanshu Srivastava, associate director-manager research, Morningstar India.
Going forward, Srivastava said, on the domestic front, the biggest challenge will be to bring COVID-19 cases further down, handle the expected second wave of infections effectively and get the economy back on the growth trajectory.
There has been an improvement in the macroeconomic scenario which has so far ensured that FPI flow remains intact.
Globally, worries about rising coronavirus infections in several parts of Europe and the US could turn investors risk-averse if the situation deteriorates. That said, the continuation of accommodative stance by global central banks may ensure the flow of foreign investments into emerging markets, including India, Srivastava further said.