FII inflows in Indian stocks, bonds in March hit 15-yr high on attractive domestic fundamentals

By: | Published: April 3, 2017 2:16 PM

Investments by foreign institutional investors into Indian equities and bonds in March hit highest in about 15 years, even as experts say that foreign investors will likely continue to be bullish on Indian markets on the back of the strong domestic fundamentals.

Data out on Friday showed overseas investors bought a net .84 billion (~ Rs 575,000 crore) worth of Indian shares and bonds during March, the biggest monthly total since at least 2002.

Investments by FIIs (foreign institutional investors) into Indian equities and bonds in March hit highest in about 15 years, even as experts say that foreign investors will likely continue to be bullish on Indian markets on the back of the strong domestic fundamentals.

Data out on Friday showed overseas investors bought a net $8.84 billion (~ Rs 575,000 crore) worth of Indian shares and bonds during March, the biggest monthly total since at least 2002, according to stocks depository services provider NSDL. equity investments are at a little over half of the aggregate amount.

“India is one of those big markets that international investors will look to, and of course there have been strong domestics reasons for India doing well after demonetisation,” Hugh Young, Managing Director, Aberdeen Asset Management Asia, said in an interview to CNBC TV18 on Monday.

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Net investments made by FIIs in Indian stocks in March alone exceeded that in the entire calendar year 2016, as foreign flows surged after Prime Minister Narendra Modi-led BJP’s resounding win in the Uttar Pradesh state elections. BJP’s landslide win and a clear mandate has bolstered hopes for additional economic reforms just as the government gears up to unveil a national goods and services tax later this year.

Indian stock markets are on a sustained rally ever since, with the benchmark NSE Nifty making a new all-time high of 9,224.65 points on Monday.

Investors have also been encouraged by signs the economy may not have been hit as hard by demonetisation of high-value currency notes, which led to removal of 86% of the currency in circulation.

Interestingly, while there seems to be a consensus that the Indian stock indices’ valuations are slightly high right now, investors are apparently unfazed as they expect the good liquidity in the global markets to continue banking on the strong domestic factors in the Indian markets.

Recently, Morgan Stanley said (before UP state election results) that Indian stock indices’ valuations are reasonable in view of historical levels, and when pitted against other emerging markets and bonds. Edelweiss Broking too had said earlier this year that it sees Nifty rising to 9,500-9,700 points by the end of the current year 2017, as the benchmark Indian index regains its premium over other emerging markets, and falling bond yields propel equity markets further.

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