Foreign Inflows At A Decade-High In August

Foreign institutional investors have bought a net $6.3 billion worth of Indian stocks in August, according to data available on the website of National Securities Depository Ltd. That's the highest since October 2010 when such inflows touched a record of $6.4 billion.

“The continued liquidity flows from developed markets with interest rates continuing to be at historically low, and guidance from central banks that they will maintain it are obviously diverting the barrage of liquidity flows to emerging markets, including India,” said Amit Khurana, head of equities and head of research at Dolat Capital. “While the risk-on trade is the norm, we will see a reality check to be setting in sooner rather than later.”

August also marked the fourth straight month of foreign inflows into India markets. This comes as the benchmarks hit their highest in more than six months, and are less than 6% shy of all-time highs. And analysts expect the markets to continue to rally.

“FPI inflows into Indian markets are higher than other emerging markets, which in turn could prop up the markets and the bullish momentum in the mid- and small-cap space,” ICICI Direct said in a report. “But a slower-than-anticipated economic recovery and high fiscal deficit, among other reasons, are key risks to FPI flows.”