FPIs turn net buyers in capital markets so far in Aug

Foreign portfolio investment in equities has touched a net Rs 5,001 crore thus far in August, according to the NSDL. Following this, the net investment of FPIs in the equities segment for 2021 has now touched Rs 54,037 crore, according to data.

As per data from the depositories, apart from the Rs 5,001-crore FPI in equities, the debt segment has also seen an inflow of Rs 2,244 crore for the month, till August 20. The overall FPI has now touched Rs 7,245 crore for August, reports show. The BSE Sensex, meanwhile, rallied to new peaks, breaching the 56k mark during the last week.

Further, other macroeconomic data have been favourable, according to experts, which may have contributed to the FPIs turning net buyers. Consumer Price Index (CPI) based retail inflation relaxed to 5.59 per cent in July, the lowest in the past three months. Further, industrial output went up by 13.6 per cent vis-a-vis the contraction of 16.6 per cent for June 2020.

Compared to emerging markets such as Taiwan, South Korea and Thailand, only India and Indonesia have shown an FPI inflow for the month of August. While Taiwan saw FPIs turn net sellers to the tune of $855 million, South Korea and Thailand saw negative inflows of $5269 million and $341 million, respectively. Indonesia saw FPIs turn net buyers to the tune of $156 million.

FPI in July 2021

FPIs have turned net buyers for August reversing their performance in July, when there was a net outflow of Rs 11,308 crore. In July, investors were concerned over Covid-19 cases in many countries, apart from increasing oil prices. Depository data also shows that FPIs withdrew Rs 10,767 crore from the financial services sector alone in July, making up for 95 per cent of the total outflow of foreign portfolio investments for the month. Experts point to deterioration of asset quality and new slippages as the reasons for the FPI outflow in July. However, NSDL data shows that foreign investors turned net buyers of retail sector stocks, worth Rs 5,500 crore, the highest such an inflow ever since the expository started tabulating data from 2012. This, experts suggest, may be a signal of revival of demand that was largely pent up during the first and second waves of the pandemic.

As far as the first quarter of FY22 is concerned, both foreign institutional investors and domestic institutional investors turned net buyers. While FIIs were net buyers in 27 firms, making up for 54 per cent of the Nifty50, DIIs were net buyers in 25 companies for the quarter.

Impact of Fed Reserve’s tapering

Meanwhile, talk of the US Federal Reserve has seen confirmation with minutes of the Fed Reserve meeting in July showing that bond buying may be tapered before the year comes to a close. Emerging markets may show some vulnerability to this tapering, and India, which is among the leading FII recipients, may also see some sort of an impact, according to experts. Volatility may be expected in global markets, including India, and analysts expect FPIs to take a cautious approach over the immediate to short term. However, India may be in a better position than other markets because of its substantial forex reserve (fourth biggest in the world) and an accommodative stance from the RBI, analysts note. Even amid the first wave of the pandemic in 2020 and a contraction of the economy, FPI inflows into India’s equity market remained solid. In fact, India was the only emerging market to get equity inflow from FPIs in 2020. For the fiscal year 2020-21, India saw an FPI inflow of Rs 2.74 lakh crore in the equity markets, and only two months, i.e., April and September saw net selling.

Conclusion

Foreign portfolio investment in India’s equity markets for the month of August stood at Rs 5,001 crore, reversing the net selling trend during July. The overall inflow into India’s capital markets stood at Rs 7,245 crore thus far in August.

FAQs

Who are foreign portfolio investors?

Foreign portfolio investors are those who invest in foreign financial assets such as stocks or mutual funds.

How much FPI did India’s capital markets receive thus far in August 2021?

India’s capital markets received a total of Rs 7,245 crore of foreign portfolio investment so far in August, with the equity markets seeing an inflow of Rs 5,001 crore.

What was the FPI into India’s equity markets in 2020-21?

For FY21, FPI inflow into India’s equity markets was at Rs 2.74 lakh crore.