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FPIs invest over $25 billion in Indian markets in CY17

Liquidity pushed benchmark indices 22% higher to become the best performing equity market globally

Deepak Korgaonkar & Puneet Wadhwa  |  Mumbai / New Delhi 

FPIs invest over $25 billion in Indian markets in CY17

Foreign portfolio investors (FPIs) have pumped in over $25.4 billion into the Indian equity and debt market segments thus far in calendar year 2017 (CY17), data with the National Securities Depository Limited (NSDL) show. The flows, analysts say, have come in on expectation of a revival in India's economic growth and recent government-backed reforms, especially in the banking sector.

Also Read: Gush of liquidity: 5 factors that helped Nifty cross 10,000

Of this, the investment in the debt segment is a staggering $16.9 billion (Rs 109,389 crore), while $8.5 billion (Rs 55,959 crore) has been invested in the equities segment, data show.

The investment pertains to all the activities undertaken by FPIs/FIIs in Indian securities market, including trades done in secondary market, primary market and activities involved in right/bonus issues, private placement, merger and acquisition, etc.

Also Read: We expect markets to consolidate gains in Sept quarter: Lewis, Gupta

As regards the equity segment, the abundant liquidity has taken the benchmark indices - the S&P Sensex and the - nearly 22 per cent higher to become the best performing market globally on year-to-date (YTD) basis.

 

FPIs invest over $25 billion in Indian markets in CY17

"The global liquidity normally finds its way into the outperforming emerging and India seemed to be a like a 'text book solution' for absorbing a part of this. Interestingly, the new found domestic liquidity which lately realised that there are hardly any other asset classes providing the returns the equity are, have started pouring in larger quantum into the hitherto forbidden asset class," explains Ambareesh Baliga, an independent market analyst.

Also Read: FPIs, MFs pump in over Rs 97,000 crore in stock markets in six months

On Tuesday, the index hit the 10,000 mark for the first time in history in intra-day deals. The rally in mid-and small-caps has been sharper, with S&P Mid-cap and S&P Small-cap indices surging over 30 per cent during this period.

Going ahead, experts feel that India will continue to attract flows from domestic and foreign investors given a stable political environment, upturn in economy, policy reforms and hope of a revival in corporate earnings over the next few years. Though in the near-term there could be aberrations / withdrawals, such rotations are a normal part of the tactical shifts in allocation that all funds make periodically, they say.

"Things seem to be favourably poised for India from a global perspective for now. Commentary from the global central banks has been fairly positive thus far and has been digested well by the On the domestic front, the economic environment is stable and the corporate earnings will pick up gradually. All this augurs well for flows into the Indian markets," says Tirthankar Patnaik, India Strategist at

Also Read: Fund raising via QIP hits eight-year high; banks lead

Back in CY14, FPIs had invested $42.4 billion in the Indian - the highest amount since CY2000 following the victory of Narenrda Modi - led National Democratic Alliance (NDA) in the general elections. They made net investment of $10.8 billion in 2015, but tuned net sellers in 2016 to the tune of $3.2 billion.

However, there are some concerns as well. Patnaik, for instance, is worried about the falling exports over the past three months, which could derail the overall economic pick-up and hamper flows. Besides, corporate earnings now need to catch up for the rally and pace of flows to sustain. The overall market however, could remain buoyant given the flows from the retail investors, experts say.

Also Read: Elusive earnings recovery the biggest domestic risk for markets: Jaipuria

"PE (price-equity) multiple expansion rather than earnings growth explains nearly all of the performance this year for India. The risk - reward fundamentally is clearly unfavourable but we acknowledge that local retail flow can keep elevated despite the absence of a near-term growth recovery," says Gautam Chhaochharia, head of India research at in a recent note.

Given the risks, UBS has revised its end-2017 downside scenario for the index to 7,500 levels (based on 15x PE) and upside the scenario to 10,000 (based on 18x PE).

 

First Published: Wed, July 26 2017. 23:47 IST
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