Foreign portfolio investors (FPIs) have pushed in a net ₹20,574 crores into the Indian capital market in June so far, amid increasing inflows into emerging markets due to high liquidity. The latest depositors data show that the FPIs invested a net ₹22,840 crores in equities but pulled out ₹2,266 crores from the debt segment between Jun 1-12. This difference between the two translates into a cumulative inflow of ₹20,574 crores. Before this time, the FPIs were net sellers for three consecutive months. They sold out ₹7,366 crores in May, ₹15,403 crores in April, and a record ₹1.1 lakh crore in March.
Harsh Jain, co-founder, and COO at Groww said that as the governments of different countries all over the world are taking measures to stimulate their economies, more printing of money is seen which is leading to higher liquidity which is a big factor behind more money flowing into emerging markets like India. However, it is seen that FPI inflow in the second week of June was lower than the first week. Last week the major investment by foreign investors was put into the rights issue of the Reliance Industries and stake sale of 2.8 percent by Uday Kotak in Kotak Bank.
Himanshu Srivastava, associate director- manager research, Morningstar India said that foreign investors are adopting a measured approach towards India in the wake of a spike in COVID-19 cases in the country. He also added that foreign investors 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 levels in fixed income securities are relatively high, while the returns do not come up to the level of risk.
Though FPIs are highly interested to invest in the Indian equity market, it needs to sustain to call it a change in trend and not a short-term investment opportunity. If the situation worsens, foreign investors can withdraw back all their investments. So far there are no signs of coronavirus curve flattening in India, the Indian economy needs to revive fast which will be one of the key drivers for the decision of foreign investors to invest in Indian markets.