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Monday, October 25, 2021

FPIs turn to India amid global headwinds, pump in Rs 17K crore

US Federal Reserve Chairman Jerome Powell indicated that the central bank is likely to begin tapering before the end of the year.

By: ENS Economic Bureau | Mumbai |
Updated: September 20, 2021 10:22:45 am
FPIs had pulled out Rs 11,308 crore in July and invested Rs 2,083 crore in August. FPIs have invested Rs 62,406 crore in 2021. (File Photo)

With the markets remaining buoyant, Foreign Portfolio Investors (FPIs) remained net buyers in domestic markets so far in September by investing a net sum of Rs 17,822 crore. FPIs invested Rs 11,287 crore into equities and Rs 5,018 crore in the debt segment on a net basis between September 1 and 17, according to data available from National Securities Depository Limited.

FPIs had pulled out Rs 11,308 crore in July and invested Rs 2,083 crore in August. FPIs have invested Rs 62,406 crore in 2021.

VK Vijayakumar, chief investment strategist, Geojit Financial Services, said, “An important trend in FPI investment since July is the increasing inflows into equity and debt. After the Rs 12,308 crore of selling in equity in July, FIIs have been steadily increasing their buying in equity with Rs 2,083 crore buying in August and Rs 11,287 crore up to September 18. Buying in debt which began for the first time this year in July continues in September, aided by steady rupee.”

“The regulatory crackdown in China and the consequent huge erosion of investor wealth has made India an attractive investment destination for FPIs. FPIs have been showing interest in segments like hotels and travel since these segments have started to do well. Some profit booking is seen in segments like metals and insurance which had appreciated handsomely,” he said.

US Federal Reserve Chairman Jerome Powell indicated that the central bank is likely to begin tapering before the end of the year. “Tapering means less of the QE bond purchase programme which has been pursued post the financial crisis. But in the case of rate hikes, it is still some distance away and this means that hikes are not imminent as there is still “much ground to cover” before the economy hits full employment,” Care Ratings said in a report.

The markets reacted positively to Powell’s comments, sending major stock indexes to record highs.

“The Fed’s balance sheet is now at nearly $8.4 trillion, about double where it was in March 2020. The reaction in Indian markets is that this is positive though negative news. The line of reasoning is the following. It is positive news insofar as it indicates a recovery in the global economy especially the USA and the collateral benefits would flow to the EMs,” it said.

If the US Fed starts tapering, there will be less liquidity in the system, and fund managers will start reconsidering their options.

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