FPI inflows hit 10-month high of Rs 122.6 bn on softer crude, rupee gains

Overseas investors have pumped Rs 122.6 billion into the Indian capital markets in November, making it the highest inflow in 10 months due to falling crude oil prices and sharp rupee appreciation.

The inflow comes following a net withdrawal of close to Rs 600 billion from the capital markets (equity and debt together) in the preceding two months (September and October).

Prior to that, FPIs had invested Rs 73 billion during July and August.

According to the latest depository data, foreign portfolio investors (FPIs) invested a net sum of Rs 69.13 billion in equities in November and Rs 53.47 billion in the debt market, taking the total to Rs 122.60 billion.

This was the highest inflow since January, when FPIs had put in Rs 222.40 billion in the capital markets.

FPIs have been net sellers almost throughout this year barring January, March, July and August. In these four months, overseas investors have put funds totalling over Rs 320 billion.

Selling by FIIs intensified towards the end of September, when they had pulled out over Rs 210 billion and has continued unabated in October too, with a withdrawal of Rs 389 billion.

"Hike in rates by the US Fed, rising crude oil prices, depreciating rupee, worsening current account deficit, uncertainty over the government's ability to meet fiscal deficit and the impact of these factors on the country's macro-economic condition led FPIs to withdraw their investments from the Indian markets in September and October," said Himanshu Srivastava, senior analyst manager research at Morningstar.

But with the improvement in some of the underlying factors, FPIs made a comeback in November into the Indian markets. Falling crude prices, sharp appreciation in rupee against the US dollar and improvement in liquidity situation alleviated some of the key headwinds to Indian macro-economic environment, he added.

So far this year, FPIs have pulled out over Rs 880 billion from the capital markets. This includes over Rs 350 billion from equities and close to Rs 530 billion from the debt markets.