With an average of over Rs 1,000 crore a day, the net foreign fund inflows into Indian capital markets have crossed USD 11 billion (over Rs 68,000 crore) in little over two months so far in 2015.
The analysts expect the inflows to further accelerate going ahead, following assurances in the Union Budget to revisit controversial issues like GAAR (General Anti Avoidance Rule).
The Foreign portfolio investors (FPIs) have bought shares worth a net amount of Rs 31,256 crore till March 5 this year, while in the debt segment, their net inflows stand at Rs 37,296 crore, taking the total to Rs 68,552 crore (USD 11.08 billion), as per the data compiled by the Central Depository Services Ltd (CDSL).
Overseas investors witnessed a net inflow of Rs 24,563 crore February, while the same in the previous month January stood at Rs 33,688 crore.
FIIs (Foreign Institutional Investors) were rechristened as FPIs last year under a new regulatory regime that has made it easier for them to invest in India.
Market participants attributed the robust inflows to positive investor sentiment driven by the government’s announcement of several reform measures in recent months and expectations of more announcements in the Union Budget.
They further said that inflow will continue in the coming months, as Finance Minister Arun Jaitley announced a slew of measures to attract overseas investment in the country in his Union Budget.
In 2014, the net investment by overseas investors in debt markets was Rs 1.59 lakh crore, while the figure for equities stood at Rs 97,054 crore. Overall net investment by foreign investors stood at Rs 2.56 lakh crore last year.
To soothe investors’ nerves, Jaitley deferred the controversial GAAR by two years, saying its immediate applicability can create ‘panic’ in markets.
Besides, the new rules would be put in place after resolving “certain contentious issues” and the implementation would eventually happen with prospective effect, he said.
“Today I still feel there is vulnerability in Indian economy in terms of attracting investments.
“…If I bring in GAAR now with or without amendment, it will create panic in the market. This is not the stage where I can afford allowing investors to run away or investment not to come… Inadequate investment can also affect rupee-dollar parity,” Jaitley said.
Religare Enterprises’ Chairman and MD Sunil Godhwani said that the deferment of GAAR rules will improve business confidence in India and help attract global fund flows.