Foreign investors have pumped in Rs 6,310 crore into Indian capital markets this month so far on easing crude oil prices and a strengthening rupee.
Most of the funds were infused in the debt market by foreign portfolio investors, the latest data with depositories showed. The rebound in inflows comes after a net outflow of more than Rs 38,900 crore in October, the steepest withdrawal in nearly two years. FPIs had withdrawn over Rs 21,000 crore from capital markets—both equity and debt— in September.
Overseas investors infused Rs 923 crore in the equity market during November 1-22, and Rs 5,387 crore in the debt market, taking the total to Rs 6,310 crore ($862 million), the data showed.
According to experts, an appreciating rupee and fall in oil prices provided a leeway to India's macros and accordingly influenced FPIs to change their stance towards emerging markets.
“The latest inflow could be attributed to falling in crude prices, recovery in rupee against the dollar and improvement in the liquidity situation,” Himanshu Srivastava, senior analyst at Morningstar Investment Adviser India, said.
On the global front, escalating trade war tensions between the U.S. and China caused widespread uncertainty in emerging markets. This, coupled with increasing interest rates globally, turned investors risk-averse the world over, which prompted them to look for other attractive and safer alternatives, he added.
FPIs have pulled out over Rs 94,000 crore from the capital markets so far this year. This includes more than Rs 41,000 crore from equities and nearly Rs 53,000 crore from the debt market.
“I don't expect any significant inflow from FPIs in the remaining part of this year. Movement of rupee versus the dollar, the direction of crude prices, domestic liquidity, upcoming state elections as well as general elections next year are some of the factors which the FPIs would be watching closely,” he said.
There are other emerging markets like China and Brazil which are better placed in terms of valuation compared to India, according to Srivastava.
“Looking at all these factors and the ongoing scenario, there is still some time before India sees strong inflows from FPIs.”
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