After pulling out around Rs 60,000 crore from Indian markets in September and October, foreign portfolio investors (FPIs) seem to be on the comeback trail with the month of November witnessing an inflow of Rs 5,642 crore.
According to figures compiled by the National Securities Depository (NSDL), FPIs focused on the debt market with Rs 5,650 crore inflows going into this segment. While FPI outflows from the equity market were Rs 10,825 crore and Rs 28,921 crore in September and October respectively, the month of November witnessed only Rs 10 crore outflows. The Sensex had risen by 550 points to 34,981.02 in November so far. However, in the financial year so far, total FPI outflows had crossed the Rs 100,000 crore mark, raising concerns on the current account deficit front. India had received around Rs 2 lakh crore FPI inflows in the calendar year 2017.
“FPI flows have witnessed an investment outflow in five out of seven months this fiscal, with exceptions in the month of July and August. November has witnessed a reversal in this trend with foreign portfolio investors investing in India to the tune of $718 million, indicative of positive FPI flows in the Indian economy,” said a Care Ratings study. The study said there could be several arguments which could be linked to the recent FPI inflows in the economy, ranging from easing crude oil prices which augur well for the Indian economy, to moderation in inflation, improved indirect tax numbers, unchanged global monetary policy stance (US, BoE, BoJ and ECB), and strengthening of the rupee.
Economic Affairs Secretary Subhash Chandra Garg had recently said the government was trying to find ways to ensure stability of FPI fund flows into the financial markets. “We are trying to find ways where portfolio investment become more stable rather than behave in this unstable way,” Garg said. He said the government will stick to the 3.3 per cent fiscal deficit target set in budget for current fiscal.
The rupee on Thursday vaulted by 77 paise to end at 70.69 against the US dollar as the softening crude oil prices and rising foreign capital inflows boosted the recently battered Indian currency. With this, for the rupee, which has gained nearly five per cent from a low of 74.4 on October 9 this year, this is the seventh straight session of gains for the domestic unit amid the weakening of the US dollar against some currencies overseas. The Indian currency had depreciated by 14.1 per cent from the start of the financial year FY19 and touched a low of 74.4 against the dollar on October 9, 2018. After hitting a four-year high of almost $87 a barrel, the Asian benchmark Brent oil has fallen sharply, retreating about 28 per cent to $61.71 a barrel last week. The outlook for oil has turned negative amid rising production and concerns over global economic growth. Indian futures prices also shed by more than 30 per cent since the first week of October.
Worries over supply crunch on the prospect of tough sanctions on Iran and higher demand from top oil consumers had kept oil prices at multi-year highs earlier.