After pulling out hefty funds from the capital market over past two months, foreign investors have turned net buyers in October so far and pumped in close to Rs 17,000 crore, buoyed by RBI's rate cut and positive macroeconomic data.
After pulling out hefty funds from the capital market over past two months, foreign investors have turned net buyers in October so far and pumped in close to Rs 17,000 crore, buoyed by RBI’s rate cut and positive macroeconomic data.
Most of the fresh capital has been infused in the debt markets.
The net inflow by foreign portfolio investors (FPIs) in the stock market stood at Rs 3,295 crore between October 1-16 while it read Rs 13,695 crore for the debt market, translating into a net inflow of Rs 16,990 crore, depository data showed.
Prior to that, FPIs pulled out over Rs 23,000 crore from the capital market (equities and debt) in the past two months on fears of an economic slowdown in China, which led to a global sell-off.
They withdrew Rs 5,784 crore last month and another Rs 17,524 crore in August, the highest net outflow by FPIs in a single month since 1997. The segregated data prior to 1997 are not available.
Investor appetite returned after Reserve Bank of India (RBI) Governor Raghuram Rajan last month pulled off a surprise by announcing a bigger-than-expected policy rate cut of 50 bps to 6.75 per cent –the lowest in four and a half years — to spur growth, said Gaurav Jain, Director, Hem Securities.
Further, RBI’s move of increasing the FPI limit in government securities has helped overseas investors to park their money in the debt markets.
Besides, positive macro parameters helped too, with industrial production growing at a nearly three-year high of 6.4 per cent in August, infrastructure output growing 2.6 per cent in the same month and fiscal deficit for April-August narrowing to 66.5 per cent of the full-year target.
Furthermore, prospects of a delay in rate hike by the US Federal Reserve from the near-zero level has helped the inflows.
“The odds of a US rate hike in October have lessened due to poor payroll data,” said Vinod Nair, Head-Fundamental Research at Geojit BNP Paribas Financial Services.
Since the beginning of the year, overseas investors have made a net investment of Rs 24,342 crore in equities and Rs 53,091 crore in debt market.