Economic Survey 2020-21: India only country among emerging markets to receive equity FPI inflows in 2020

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January 29, 2021 8:30 PM

Economic Survey 2020-21: India attracted $30 billion in the first nine months of the year, according to the Survey.

FPI flowsOn FPI outflows in March, Himanshu Srivastava, associate director - manager research, Morningstar India said that this could be attributed to profit booking by investors with markets touching all-time highs.

India was the only country among emerging markets to receive equity inflows from FPIs in 2020, as the country attracted USD 30 billion in the first nine months of the year, according to the Economic Survey.

Also, net inflows from foreign portfolio investors (FPIs) recorded an all-time monthly high of USD 9.8 billion in November 2020, as investors’ risk appetite returned.

“During April-December 2020, equities witnessed an inflow of at USD 30 billion, five times its previous year value – India was the only country among emerging markets to receive equity FII inflows in 2020,” according to the Survey tabled in Parliament on Friday.

As a result of strong inflows, buoyant Sensex and Nifty resulted in India’s market-capitalisation to Gross Domestic Product (GDP) ratio crossing 100 per cent for the first time since October 2010.

“While stock markets value the potential future growth, these elevated levels still raise concerns on the disconnect between the financial markets and real sector,” the Survey noted.

However, other emerging markets like Indonesia, Malaysia, South Korea, Taiwan, Philippines, Brazil, Thailand and South Africa witnessed outflows from FPIs last year.

“The total cumulative investment by FPIs (at the acquisition cost) increased 5.4 per cent to USD 273.6 billion as on December 31, 2020 from USD 259.5 billion as on December 31, 2019,” the Survey pointed out.

In addition, markets regulator Sebi has granted certain temporary relaxation to FPIs in view of the COVID-19 pandemic.

This included providing temporary relaxation in processing of documents pertaining to FPIs by allowing designated depository participants and custodians to process the request for registration/ continuance / KYC review and any other material change on the basis of scanned version of signed documents(instead of originals) and copies of documents which are not certified, received from specified email.

Apart from this, investors put in Rs 2.76 lakh crore into the mutual funds industry during April-December 2020-21, as compared to a net inflow of Rs 1.82 lakh crore in the corresponding period of the last year.

The inflow led to 45-player mutual funds asset base rising 17 per cent to reach an all time high of Rs 31.02 lakh crore at the end of December 31, 2020 from Rs 26.54 lakh crore at the end of December 31, 2019.

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