Foreign portfolio investors (FPIs) have bought close to $1 billion worth equities since the beginning of March. After the Budget announcement, foreign funds who had been net sellers since the beginning of the calendar year turned aggressive buyers.On the other hand, domestic funds have liquidated `1,274.5 crore worth equities in just four trading sessions of March so far.
A relief rally after the Budget has been visible on the Indian bourses as benchmark indices posted a gain of 2.3% last week, the best weekly gain in four years in percentage terms. Among its peers, India is also currently valued as the second-most expensive market after Indonesia trading at a one year forward price to earnings multiple of 15.1 times.
India Ratings and Research in a recent report said, “The Budget has reinforced the credibility and confidence of investors by adhering to the fiscal consolidation path. This is a near-term positive for both debt and forex. However, the reinforcement of confidence is necessary but not the sufficient condition for changing underlying fundamentals. Both debt and currency markets are likely to gain owing to improved investor sentiments in the near term.”
FPIs had sold $3.3 billion worth equities in the first two months of 2016 as they had been risk averse since the beginning of the year with increasing concerns over the Chinese economy and an overall slowdown in global growth. Foreign funds had been offloading their stakes across Asian and emerging markets.
However other peer markets especially Asian markets, have also seen an inflow of foreign funds since the beginning of March.