FPIs remain invested in Indian markets despite volatility (Weekly Review)

Foreign Portfolio Investors (FPIs) continued to stay put in the Indian equities market for the week ended March 20 despite the anxiety regarding the US Fed's stand on a rate hike possibility.

The FPIs stayed invested in the Indian markets despite other issues like passage of key bills in the parliament session, concerns regarding the marginal increase in the retail inflation for February and the expected subdued March quarterly earning results.

However, the US Fed took a dovish stand and said that the rate hike might take place in the later part of the year. This gave a major relief to markets such as India where the down side of the meet was being seen as an immediate or a near future rate hike announcement.

With higher interest rates in the US, the foreign portfolio investors (FPIs) are expected to be led away from the emerging markets such as India.

"The long term FPIs like pension funds and sovereigns understand the long term value of staying invested in the Indian market. There is no market in the world where the FPIs will get such an opportunity of growth and economic reforms process. After the dovish stand taken by the US Fed even the short-term investment-based hedge funds will find the Indian markets more attractive," Devendra Nevgi, chief executive, ZyFin Advisors told IANS.

"The Indian markets have come a long way since the June 2013 period of extreme volatility due to tapering. Our economic macros are quite positive which show future growth. Even the Reserve Bank is quite active as to avoid any repeat of the June 2013 type volatility," Nevgi added.

For the week ended March 20, the FPIs bought stocks worth Rs.1,952.36 crore or $312.46 million, according to the data with the National Securities Depository Limited (NSDL).

However, the foreign investors sold stocks worth Rs.1,159.96 crore or $184.82 million in the week under review.

During the previous week ended March 13, the FPIs had bought stocks worth Rs.3,234.7 crore or $518.24 million. At that time they had off-loaded stocks worth Rs.957.61 crore or $152.69 million.

The foreign institutional investors (FIIs) along with sub-accounts and qualified foreign investors have been clubbed together by market regulator Securities and Exchange Board of India (SEBI) to create a new investor category called FPIs.

"Flows remained positive overall in the equity markets from FII's (Foreign Institutional Investors) and DII's (Domestic Institutional Investors) and the possibility is that allocations towards India will be much more higher in the future," said Gaurang Shah, Vice President, Geojit BNP Paribas.

"On the flip side we have seen crude oil prices head lower after a minor bounce this will smoothen the negative impact of the domestic data points,"Shah added.

The triggers for the FPIs in the coming week will be the concerns regarding the marginal increase in retail inflation for February which belied expectations of a rate cut next month.

The Reserve Bank of India is scheduled to announce its first bi-monthly policy review for 2015 on April 7.

"The FPIs will also await for the fourth quarter results, which are expected to be subdued," Dipen Shah, head, private client group research, Kotak Securities, told IANS.

The passage of several key bills like coal mines (special provisions), mines and minerals (development and regulation) and appropriation bill 2015-16 were also keenly observed by the FPIs.

Parliament has gone into a month long recess and will resume on April 20.

According to Nevgi, the FPIs will keenly watch the ground level implementation of the various bills that were passed and any announcements regarding the post session reforms.

Meanwhile, the Indian equities markets lost 242 points or 0.84 percent during the weekly trade ended March 20.

The benchmark 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) fell 242.22 points or 0.84 percent during the weekly trade session ended March 20.

The Sensex ended March 20 trade at 28,261.08 points. For the previous weekly trade ended March 13, the BSE Sensex had closed at 28,503.30 points.

The consolidation in the Indian markets continued since the weekly close of March 13, when the S&P BSE Sensex plunged 945.65 points or 3.21 percent to its worst weekly fall in 2015.