Foreign portfolio investors (FPI) have pumped in $8.25 billion into the Indian equity markets since the start of the year. This is way above inflows seen in 2016 and is the result of abundant liquidity in the global markets. According to Motilal Oswal, FPI flows have been strong topping the aggregate flows of the last two years with the amount of $8.4 billion in 1HCY17, the highest in the last six and a half-years. A relatively stable currency with the rupee being one of the better performing currencies has provided comfort to investors to remain in this market, according to CARE Ratings. “The higher inflow into Indian markets is due to positive sentiments on account of increased government spending in infrastructure, a good monsoon, consumer spending and implementation of goods and services tax (GST)”, CARE added.
Long-term FPIs include sovereign wealth funds, multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks. CARE Ratings said that for the year 2017, FPI of around $25 billion may be expected primarily on account of the equity flows as there are limits to which debt investment can increase from hereon.
“Despite the US Fed rate hike and hints of an ECB tapering next year, EM flows continued to be positive in June 2017 with the top 10 EM-focussed ETFs garnering inflows of $5 billion. Monthly capital-raising in the form of IPO’s and QIP’s hit a multi-year high in June at $3.6 billion,” ICICI Securities.
“After posting muted returns for the last two years, the Nifty gained an impressive 18% in CY17 YTD. Notably, during the first half of this calendar year, the index delivered positive returns for five consecutive months before declining 1% in June. Elevated valuations, concerns about near-term earnings disruption due to GST implementation, and uncertainty about progress of monsoon weighed on investor sentiment,” said Motilal Oswal in its India Strategy report.