Foreign investors have pumped in a staggering $3 billion in the Indian capital markets this month so far as regulator Sebi has raised investment limit for FPIs in government debt. Most of the funds were invested in the debt markets during the period under review.
“Foreign Portfolio Investors (FPIs) investing more in debt is mainly due to two reasons. Sebi raised FPI investment limit for government debt and benchmark 10-year government bond yield rose to its highest in 7 months. These factors have made Indian debt instruments more attractive to foreign investors,” Advisorymandi.com CEO Kaushalendra Singh Sengar said.
Besides, earlier this month RBI Governor Urjit Patel said that banks still have scope to cut loan rates even though demonetisation has already helped faster monetary transmission into interest rates, which has further raised investors’ sentiments. According to the depository data, FPIs infused a net sum of Rs 1,132 crore in equities during April 3-21 and another Rs 17,758 crore in the debt segment, translating into a combined inflow of Rs 18,890 crore (US 2.91 billion).
This comes following a record net inflow of Rs 56,944 crore ($8.7 billion) last month, mainly on expectations that BJP’s victory in the recently held assembly polls would lead to faster reforms. In February, FPIs had made a net investment of Rs 15,862 crore in equity and debt markets. Prior to that, FPIs had pulled out more than Rs 80,000 crore between October 2016 to January 2017.
With the latest fund mobilisation, total inflow has reached to Rs 87,517 crore ($13.34 billion) so far this year in the capital markets (equity and debt). Geojit Financial Services Chief Market Strategist Anand James said: “The prospects of a gradual US rate hike looks to have improved the risk appetite. This should also mean, save a negative surprise from monsoon forecast, fourth quarter numbers should prompt investors to be forward looking”.