India leads EM pack in foreign flows, attracts close to $6 billion so far

Investments by FPIs into the Indian markets, so far, this calendar have been higher than other emerging markets (EMs). India attracted close to $6 billion, even as the markets like Taiwan and South Korea recorded outflows. Within the EM space (excluding China due to unavailability of data), Brazil is the second in terms of FPI flows, with inflows of $4.9 billion.

The MSCI India's valuation premium to EM is now at 40 per cent, 3 per cent above the long-term average, according to BofA Securities.

Last month, the Indian markets saw FPI flows in excess of $1.9 billion into India last month. Flows were skewed in favour of sectors, such as industrials ($684 million), energy ($461 million), and discretionary ($404 million). Financials ($227 million) and real estate ($38 million) — despite improving sentiment — saw outflows during the month, the BofA data shows. 

As of January end within the NSE universe, FPIs continued to maintain overweight positions on IT (+0.8%), industrials (+0.4%), and telecom (+0.2%), and remained underweight on financials (-1.13%), energy (-0.34%), and staples (-0.11%). The sectorwise break up of foreign flows is available with a lag.

The Indian IT services industry reported one of its strongest third quarters in FY21, helped by increased technology spends across all key industries and pick up in deal sizes, according to analysts.  The outlook for the BFSI sector, which underperformed the broader market in 2020, has also improved.