FPI inflows continue to pour into India

This surge in FPI investments is primarily because the investor is starting to factor in two key components of the Indian market. First rapid improvement in consumer demand after the post lockdown period due to Covid-19 and second, gradual recovery in business investment

Mumbai: The equity market so far witnessed inflows of over $5.5 billion (around Rs51,000 cr) as on November 25.

"This is the highest ever inflow pumped in by FPIs in Indian Equity. FPIs have scaled up buying mainly because of stimulus funds, which created liquidity in their systems and also meeting PM Modi on November 5 where the government showcased the reforms and recent steps to boost economy," said Nilesh Karani, V-P (research), Magnum.

In fact, India's equity markets after the pandemic-led rout in March saw an FPI outflow of $8.3 billion. From May to August, FPIs remained net buyers in the Indian markets, pumping in $11.4 billion in total. October so far seen FPIs buying equities worth $821 million, In September, there was an outflow of $767.2 million.

At a net inflow of $3.07 billion between March and so far in October, Indian markets are better placed than most emerging equity markets. For instance, countries such as Thailand, Brazil, Taiwan and South Korea have seen outflows of between $7.7 billion and $20.1 billion from March till date in October. India also remains the only emerging market in Asia besides China to see FPI inflows for the calendar year.

Ashis Biswas, head (technical research), CapitalVia, said that "this surge in FPI investments is primarily because the investor is starting to factor in two key components of the Indian market. First - rapid improvement in consumer demand after the post lockdown period due to Covid-19 and second, gradual recovery in business investment.

As the investors become more knowledgeable about the situation related to the Covid-19 pandemic the sentiment is improving accordingly."

Biswas further said, the surge in investment is an adjustment of the initial overreaction followed by the withdrawal of investment from the market as the information was less when the Covid-19 was just started to spread over the world. It has been observed even at this stage of the market the stocks are not to be considered overvalued in terms of the fundamentals and there is plenty of room upside from an investment point of view.

Investors are probably eying the same too. "We expect foreign investment flow to continue and any temporary market correction as the market sentiment is at the peak of optimism and an adjustment of it is more likely, will attract further capital inflow into the market," added Biswas.

Who are FPIs?

Well, foreign portfolio investment (FPI) consists of securities and other financial assets held by investors in another country. FPI involves holding financial assets from a country outside of the investor's own. These could be a foreign institution, foreign fund, foreign individual investors. FPI holdings can include stocks, ADRs, GDRs, bonds, mutual funds, and exchange-traded funds.