Overseas investors poured in just about USD 7.4 billion in the Indian debt markets in 2015, after having pumped in a staggering USD 26 billion in the preceding year.
Foreign funds also stayed away from Indian equities in 2015 and invested just Rs 17,806 crore (USD 3.2 billion) in stock markets last year.
In comparison, FPIs had been investing around Rs 1 lakh crore each into equities in the preceeding three years.
The decline in inflows has been attributed to a slew of domestic and international factors including concerns of a global slowdown, Chinese equity meltdown and an imminent interest rate hike by the US Federal Reserve.
Besides, delay in implementation of major economic reforms in India also dampened investors’ sentiments.
As per the data available with depositories, Foreign Portfolio Investors (FPIs) infused a net amount of Rs 45,856 crore (USD 7.4 billion) in the debt markets in 2015 as compared to a record investment of Rs 1.6 lakh crore (USD 26 billion) in the previous year.
In 2013, FPIs had pulled out around Rs 51,000 crore (USD 8 billion). Prior to that, overseas investors had invested about Rs 35,000 crore, Rs 42,000 crore and Rs 46,408 crore in 2012, 2011 and 2010 respectively.
The capital poured in by the FPIs is often been called ‘hot money’ because of its unpredictability, but these overseas entities have still been among the most important drivers of Indian stock markets.
Interestingly, most of the inflows witnessed in 2015 into Indian debt market has gone into government securities.
Despite weaker inflows this year, FPIs’ cumulative net investments into the debt markets, since being allowed over two decades ago in November 1992, has now reached about Rs 3 lakh crore.