Foreign Portfolio Investors (i.e. FPI ‘s) have pumped in a net around Rs 20,574 crore into the Indian capital market in June so far during increasing inflows into emerging markets because of high liquidity. According to the latest depositories data, FPIs invested a net around Rs 22,840 crore in equities but pulled out Rs 2,266 crore from the debt segment between 1st June to 12th June. This translates into a cumulative inflow of around Rs 20,574 crore. Prior to this, FPIs were net sellers for 3 consecutive months as well. They pulled out of worth Rs 7,366 crore in May, Rs 15,403 crore in April, and also a record Rs 1.1 lakh crore in March. Harsh Jain, the co-founder and COO at Groww, told – “As governments all over the world are taking measures to stimulate their economies, we are seeing more printing of money that is leading to higher liquidity and is a big factor behind more money flowing into emerging markets like India.” Although, Himanshu Srivastava, associate director- manager research, Morningstar India, told FPI inflow in the second week of June was lower as compared to the first week.
Last week, the rights issue of Reliance Industries and a stake sale of around 2.8 percent by Uday Kotak in Kotak Bank were the major draw for the foreign investors. He further added that FPIs have shifted their focus towards safer investment options like gold or US dollar as against investing in fixed income securities of emerging markets like India, given that the risk of the levels here are relatively high and also returns not commensurate with the same as well. Although foreign investors have started to invest in the Indian equity market, as it needs to sustain to call it a change in trend and also not a short-term investment opportunity so well. If the situation worsens, foreign investors can again take a flight to safety, as per Srivastava noted.
“So far, there are no signs of the coronavirus curve flattening in India. Going ahead, the revival of the Indian economy will be one of the key drivers for foreign investors’ decision to invest in Indian markets,” he added.