Indian capital markets witnessed a net inflow of over Rs 3,800 crore by foreign portfolio investors in October so far on the back of steps taken by the government to revive domestic demand coupled with positive global cues.
The depositories data showed that overseas investors pumped in a net amount of Rs 3,769.56 crore into equities and Rs 58.4 crore in the debt segment, taking the total net investment to Rs 3,827.9 crore in this month so far.
FPIs have been net buyers for the second consecutive month. In September, FPIs invested a net Rs 6,557.8 crore in the domestic capital markets in both equity and debt.
Investment in September had come following net outflows in July and August.
“Considering the extreme negative trends witnessed in the month of July and August, where FPIs went on a selling spree, the scenario in the months of September and October so far, directs towards the emergence of a positive trend,” said Himanshu Srivastava, senior analyst manager research at Morningstar Investment Adviser India.
“The steps taken by the government to revive domestic economic activity has finally found favour among foreign investors. Also, a reprieve in the U.S.-China trade war would help increase risk-appetite among global investors which could lead to increase foreign flows into emerging markets such as India,” he added.
Commenting on global developments Alok Agarwala, head of research and advisory at Bajaj Capital said, “The bulk of inflows in the equities was due to favourable global cues as the U.K. and European Union reached a new Brexit deal and a partial U.S.-China deal being done on the trade front.
“These developments have eased concerns over global economic growth as Brexit and US-China trade war have been for a long time upsetting the fabric of markets,” he added.
However, going forward, FPI flows will be influenced by how the economy performs and how soon corporate earnings recover. The U.S. Fed's monetary stance and global liquidity will be crucial in determining FPI flows. The further progress in U.S.-China trade deal would also help the inflow in the emerging market as investors would encourage to take risk-on trade, Agarwala added.
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