FPI inflow up after govt’s eco reforms, nearly Rs 8,000 cr invested in Sep; will flow continue?

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Updated: September 30, 2019 12:35 PM

After remaining sellers for the previous two months, FPIs poured in nearly Rs 8,000 crore in September following a slew of economic reforms announced by the government.

The dollar’s share in import transactions remained unchanged at about a third. (Representational Image)Following the announcement or corporate tax rate cut by the government, the stock markets also rallied, gaining nearly 3,000 points in two days.

After remaining sellers for the previous two months, FPIs poured in nearly Rs 8,000 crore in September following a slew of economic reforms announced by the government. The foreign investors pumped in Rs 7,850 crore into equities in the ongoing month after selling Rs 30,000 crore in July and August combined, the NSDL data showed. Finance Minister Nirmala Sitharman announced a host of measures in the last few weeks ranging from cut in corporate tax rate and recapitalisation of banks. Even the market regulator SEBI simplified KYC requirements for FPIs. In July and August, foreign investors pulled out Rs 12,419 crore and Rs 17,592 crore, respectively from the markets amid the ongoing economic slowdown.

Following the announcement or corporate tax rate cut by the government, the stock markets also rallied, gaining nearly 3,000 points in two days. The net outflows from equity and debt combined amounted to Rs 3,003 crore in July and Rs 5,871 crore in August.

“FPI flows have picked up due to various measures taken by the Government. Going forward as global tensions reduce we should see more flows into India. Now the market has become buy on correction rather than sell on rally and should remain so for the foreseeable future,” said investment advisor Sandip Sabharwal.

Even as Nirmala Sitharaman announced economic reforms  along with a relatively accomodative monetary policy stance, the FPI flows are expected to be under stress owing to muted global and domestic demand outlook, India Ratings said in a report.

Also read: PSU disinvestment: Govt may cut stake in Indian Oil, NTPC, GAIL to below 51%

“Even as the government reforms have improved sentiment in the market, the continuing problems in the BFSI space pose a concern. Until the NBFC issue is resolved, the FPI flows and domestic investment will not be uniform in the coming days,” Abhimanyu Sofat, VP Research, IIFL told Financial Express Online.

RBI’s next bi-monthly monetary policy committee (MPC) announcement will be made on October 4, 2019. The committee has slashed repo rate four times in a row so far this year. The experts say that another rate cut may boost the economy and help revive demand.

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