Foreign portfolio investors continue to favour India over other emerging market peers

Published: February 21, 2020 1:00:35 AM

According to the latest Bloomberg and NSDL data, India has received inflows worth $3.4 billion so far in 2020 against an outflow of $91.34 million a year ago.

The flows into the Indian equity markets are coming in despite the tepid earnings season. The flows into the Indian equity markets are coming in despite the tepid earnings season.

By Urvashi Valecha

Foreign portfolio investors (FPIs) seem to like the Indian market compared to other emerging markets, going by the relatively high inflows for the second consecutive month. The impact of coronavirus on other emerging markets and buying in the primary markets are the main reasons for FPI inflows, according to market experts.

According to the latest Bloomberg and NSDL data, India has received inflows worth $3.4 billion so far in 2020 against an outflow of $91.34 million a year ago. So far in February, FPIs have bought shares worth $2.1 billion whereas other EMs such as Taiwan, Brazil, South Korea, and Thailand witnessed outflows. Brazil saw an outflow of capital worth $6.44 billion this year since its commodity-dependent economy has taken a hit because of the volatility of commodity prices. Additionally, Taiwan has seen an outflow of $1.59 billion since January.

Sanjeev Hota, head of research, Sharekhan by BNP Paribas, explained that coronavirus is a transient issue with a near-term impact. “India is continuing to see FPI flows because we have not seen any drastic impact of coronavirus compared to some southeast Asian markets,” he said.

Since the start of the year, the Sensex and the Nifty have fallen 0.20% and 0.72%, respectively, despite the FPI flows. Deepak Jasani, head of retail research, HDFC securities, said the flows have been mainly driven to the primary equity markets. “QIPs like DMart and Prestige Estates could have caused the buying in February. In January too, there has been minimal buying in secondary markets,” he said.

The flows into the Indian equity markets are coming in despite the tepid earnings season. Kotak Institutional Equities (KIE) said the current results season affirmed the economic slowdown and showed little evidence of an imminent recovery given the subdued management commentary on demand conditions.

“Q3FY20 net profits of Nifty-50 index grew 11.5%, versus our expectation of 21% growth and Ebitda grew 1.3%, 5% below expectations,” KIE wrote.

In 2019, India received flows worth $14 billion which was more than that received by the Philippines, Thailand and Brazil. This was mainly because of the accomodative policy of various central banks. “Broadly, an array of policy decisions and local factors (which were less negative) could have made India more attractive relatively compared to other Asian markets,” said Deepak Jasani.

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