FPI inflow in equity nears Rs 1 trillion in 2019, highest in six years

Overseas investors have been pouring in money in quality large-cap stocks in calendar year 2019 (CY19), with their net investment in Indian equities nearing the Rs 1-trillion mark during this period – a six-year high. Thus far in CY19, foreign portfolio investors (FPIs) have pumped in a net Rs 99,966 crore ($14.2 billion) in equities. The inflow during the year is highest since CY13, when they made a net investment of Rs 1.1 trillion ($20.1 billion) in equities.

FPIs reposed faith in India in the fourth quarter of CY19, putting in Rs 43,781 crore during October – December CY19, after pulling out Rs 22,463 crore from Indian equities during the third quarter (July-September) of CY19 from the equity market, according to the latest available depository data.

A latest report by BNP Paribas pegs the total flows in six major Asian regions – India, Taiwan, Korea, Indonesia and Philippines at $24 billion at the end of November 2019, compared to an outflow of $16.7 billion in 2018. 

“Starting from the third quarter of CY19, foreign flows into Asia were consistently positive. The biggest winners were India ($12.8 billion), Taiwan ($9.1 billion) and Indonesia ($2.9 billion). Flows into Asia should rebound in 2020. Continued rate cuts and a newly begun quantitative easing by the US Federal Reserve, and an ongoing liquidity expansion by other frontline central banks are key potential catalysts for a revival in FII flows,” says Manishi Raychaudhuri, head of equity research for Asia Pacific at BNP Paribas.

A strong FPIs inflow during the year saw the benchmark indices — the S&P BSE Sensex (up 15 per cent) and the Nifty 50 (up 12 per cent) — register double digit returns in CY19. The benchmark indices have recorded their second best performance in past five calendar years. 

Earlier in CY17, the S&P BSE Sensex and Nifty had rallied 28 per cent and 29 per cent respectively, on healthy inflows by FPIs as well as domestic mutual funds. FPIs had invested a net Rs 51,252 crore, while mutual funds had put in Rs 1.2 trillion in equities during CY17.

On the other hand, domestic mutual funds pumped in Rs 52,850 crore in equities during CY19. Their holdings in 13 stocks from the Nifty and Sensex stocks, such as ICICI Bank, Kotak Mahindra Bank, HDFC Bank and Bharti Airtel, was at an all-time high level at the end of September quarter. These stocks have seen their market price appreciate between 21 per cent and 56 per cent during the year.

Shankar Sharma, vice chairman & joint managing director at First Global, however, remains cautious on the road ahead for flows into India and says the foreign investors remain a worried lot amid slowing growth and the recent political developments.

“Foreign investors are already very worried about India and will soon start worrying more. The recent political developments will add to their list of worries. All these increase the political risk of doing business in India. Companies want stability and a conducive environment to do business. There is a feeling that not enough recognition is being done on the problem at hand. There has to be a bouquet of policies that are needed to revive growth, which have to be backed by logic and a vision,” Sharma says.

Calendar	Net flow	Rs (in crore)
Year	FPIs	MFs
2013	113,136	-21,082
2014	97,054	23,942
2015	17,808	72,199
2016	20,568	48,170
2017	51,252	118,778
2018	-33,014	120,674
2019*	99,966	52,850

*Till December 24, 2019
Source: NSDL, Sebi
Data compiled by BS Research