Notwithstanding the rout in Chinese equities and the crisis in Greece, India remained among the most favoured destinations for overseas funds in July with equity markets receiving second-highest inflows globally.
Foreign portfolio investors (FPIs) have pumped in $875.43 million so far this month, second to Poland ($1.9 billion), showed data on foreign flows tracked by Bloomberg. All major Asian markets reported FPI selling during July.
Japan saw outflows worth $3.4 billion, while overseas funds pulled out $1.87 billion and $36.4 million out of South Korea and Indonesia, respectively.
Market experts say the rout in Chinese equity markets has benefitted India. The fall in China started in the middle of June and Shanghai Composite has lost 27% since then. The stock market has also eased global commodity prices, further boosting Indian equities. In the last one month, price of crude is down by 14% while price of gold has fallen by more than 7%, which may help India further bring down its twin deficits, boost individual savings and give consumers more power to spend.
Sakthi Siva, MD and head of Asia-Pacific equity strategy, Credit Suisse said, “With the sharp fall in Chinese markets, investors are switching to India as a safe heaven for investments.”
In terms of annual inflows too, India has witnessed highest inflows in the emerging markets universe year-to-date. India has witnessed a total inflows of $7.08 billion year-to-date against $6.9 billion in Brazil and $5.48 billion in South Korea, Bloomberg data showed.
Experts say the India equity rally would continue even after the US Fed hikes interest rates later this year. While India will not stay immune to any FOMC lift-off, India will be relatively less impacted as the emerging market differentiation is likely to intensify further as global commodity deflation becomes more entrenched.