Foreign institutional investors (FIIs) held onto their buying frenzy in the Indian market, investing Rs 24.965 billion so far in February amid optimism about the COVID-19 vaccine and a faster-than-expected economic recovery. The proposals from the Union budget have also boosted investor sentiment.
According to the custodians, Rs 24,204 billion in foreign portfolio investment (FPIs) was pumped into Indian stocks and Rs 761 billion into the debt segment, bringing the total net investment to Rs 24,965 billion from Feb.1-19. Last month, FPIs made a net investment of Rs 14,649 billion.
According to S Ranganathan, research director of LKP Securities, FPIs remained positive in Indian markets as the International Monetary Fund (IMF) forecast India as the fastest growing economy in 2021. The international agency forecast a growth rate of 11.5 percent for India for fiscal year 22 and revised its earlier forecast of an expansion of 8.8 percent. This will make India the only major economy in the world to see double-digit growth amid the coronavirus pandemic.
“A growth-enhancing budget aimed at capitalizing on the digital revolution is changing and we expect the FPI flows to continue over the next month, also supported by the realignment of the MSCI,” added Ranganathan.
Rusmik Oza, executive vice president, head of fundamental research at Kotak Securities, said better earnings performance from India Inc also boosted investor sentiment.
For emerging markets, Oza said emerging market flows have been subdued this month to date. So far, only India and Taiwan have received significant FPI flows this month, he added.
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On the debt segment, Himanshu Srivastava, Associate Director – Manager Research at Morningstar India, said FPIs have long stayed away from Indian debt markets, “mainly due to concerns about COVID-19, calibrated support from the RBI and low levels Interest rates “.
In the future, the focus will be on how quickly India is gaining economic momentum.
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“However, given the way the markets are managed and receive high valuations, there is a good chance that profits will be posted on a regular basis, which could slow the pace of net flows,” said Srivastava.
Emerging economies like India could continue to receive foreign investment as long as central banks around the world take an accommodative stance to get their economies back on track from the effects of the coronavirus pandemic, he added.
With PTI inputs