According to Himanshu Srivastava, associate director - manager research, Morningstar India, there has been excess liquidity available in the global markets with many major central banks pushing aggressive stimulus measures to combat the coronavirus pandemic and support their dwindling economies.
Overseas investors have put in Rs 41,330 crore in Indian markets on net basis in August so far as the excess liquidity in global markets found its way to emerging markets like India. According to the depositories data, foreign portfolio investors (FPI) pumped in Rs 40,262 crore into equities and Rs 1,068 crore in the debt segment between August 3-21.
Prior to this, FPIs were net buyers for two consecutive months. They invested Rs 3,301 crore in July and Rs 24,053 crore in June on net basis. According to Himanshu Srivastava, associate director – manager research, Morningstar India, there has been excess liquidity available in the global markets with many major central banks pushing aggressive stimulus measures to combat the coronavirus pandemic and support their dwindling economies.
“Also, the US is printing money constantly. The excess liquidity is finding its way into India as well as probably other emerging markets,” he added. Srivastava said FPIs have turned their focus towards emerging markets like India because these markets have been performing well and offer a good potential to generate better returns.
On the domestic front, opening-up of the economy and resumption in business activities is a positive sign. In addition to that, Indian equities continue to be attractively valued thus drawing the attention of FPI, he said.
Harsh Jain, co-founder and COO at Groww said that “after investing in bluechip stocks, FPIs are now starting to pick mid-cap and small-cap stocks.” Amidst concerns over economy due to the pandemic, FPIs headed either towards gold or bluechip stocks that are more stable and have better capacity to deal with tough times.
Now, nearly four months after the lockdowns started, we have a clearer picture of the economy which has turned out to be much better than feared, he noted. “In this backdrop, many FPIs are beginning to make selective picks in the mid and small-cap space as new opportunities emerge,” he said.
According to Rusmik Oza, executive vice president, head of fundamental research at Kotak Securities, “due to positive flows by FPIs and active participation of local investors by way of direct equities, Nifty-50 has been trading above the 11,000 mark.”
“Barring India and Brazil, FPIs have been net sellers in most other emerging markets this week and month to date.”
The US elections and their results could play a major role in deciding which way the US economy moves which in turn will have an effect on FPI investments in India, Harsh Jain added.
The availability of surplus liquidity in the global financial system may ensure that India continues to receive its share of investments, Himanshu Srivastava noted.