FPIs are still net sellers in the current year, having sold $7.6 billion worth of bonds and $5.03 billion worth of shares.
By Utsav Saxena
The relentless selling by foreign portfolio investors (FPIs) appears to have stopped, bringing some relief to the stock and bond markets and also the currency. Foreign investors have bought bonds worth $723 million and shares worth $880 million in November so far (data till November 21).
On Thursday, foreign funds are understood to have bought stocks worth Rs 446 crore or $63 million, according to provisional data on the exchanges.
The accumulated effect of the sharp decrease in oil prices and inflow of foreign money have helped the domestic currency rebound against the greenback. The rupee closed at 70.69 on Thursday, the highest level since August 29, up 76 paise compared to the previous day’s closing levels.
The domestic currency gained 219 paise or 3% against the dollar in seven trading sessions as the dollar weakened against multiple overseas currencies.
FPIs are, however, still net sellers in the current year, having sold $7.6 billion worth of bonds and $5.03 billion worth of shares.
October recorded the highest ever monthly sell-off after FPIs pulled out a massive $5.1 billion. The high outflows have directly affected the debt utilisation limits. Between June and November 21, long-term government securities utilisation limits have declined from 69.5% to 46.5%.
Experts from Kotak Institutional Equities believe that the recent inflows can be attributed to falling crude prices — which would help the currency stabilise — and the thaw in the US-China trade war. These developments helped improve investment sentiment for emerging markets, including India.
Brent crude oil, which crossed $86 a barrel in October for the first time in nearly four years, now trades at a near four-month low, just below $64. The international benchmark has lost nearly 27% in the past one month.
Additionally, the Reserve Bank of India’s continued liquidity support through a series of open market operations (OMOs) has helped calm the bond markets. Out of Rs 1,08,660-crore OMO purchase undertaken this fiscal year, the preceding three months has witnessed OMO purchase of Rs 78,010 crore, primarily as measures by the central bank to moderate the liquidity deficit in the financial system.
Big domestic investors have also faced trouble in the past two months. Mutual funds have experienced a sizeable decline in their asset base due to sudden liquidity crunch in the market in the wake of the IL&FS episode. According to the Association of Mutual Funds in India (Amfi) data, the assets under management (AUM) of MFs fell 12.6%, or over Rs 3,00,000 crore, to Rs 22 lakh crore at September-end against Rs 25.20 lakh crore at August-end due to massive outflows from liquid funds and income schemes.