FPIs remain bullish; invest $4 bn in capital markets

New Delhi : foreign portfolio investors (FPIs) pumped in a staggering $4 billion in the domestic capital market so far this month on greater clarity on rollout of the new indirect tax regime GST from July 1 and forecast of a normal monsoon. Most of the funds, interestingly, have been invested in the debt market by FPIs.

“The differential spread between 10-year bond yields in the US and India is still around 4.5-5 per cent. This, coupled with stable outlook for the Indian currency, bodes well for FPI flows into debt market,” Sharekhan Head Advisory Hemang Jani said.

According to the latest depository data, FPIs have invested Rs 3,282 crore in equities during June 1-23, while they poured in Rs 22,508 crore in debt markets during the period under review, translating into a net inflow of Rs 25,791 crore ($4 billion).

It follows a net inflow of more than Rs 1.33 lakh crore in the last four months (February-May) on several factors, including expectations that BJP’s victory in Assembly polls this year would accelerate the pace of reforms. Prior to that, foreign investors had pulled out over Rs 3,496 crore from the markets in January.

With the latest inflow, total investment in capital markets (equity and debt) has reached Rs 1.44 lakh crore (over USD 22 billion) this year.“The most prominent reason for FPIs’ net inflow is expectation from the government that it would speed up development and economic reforms in their last two years in office before going for elections in 2019.