Foreign portfolio investors remained net buyers for the second consecutive month in July by pumping in Rs 3,301 crore in Indian markets amid hopes of a coronavirus vaccine.
According to the depositories data, a net sum of Rs 7,563 crore was invested in equities, while Rs 4,262 crore were withdrawn by FPIs between July 1 and 31. In the previous month, FPIs had put in a net Rs 24,053 crore in Indian markets.
Some factors that led to investment in July include a surge in markets, which provided FPIs good profit-booking opportunity, improvement in sentiment on the back of rising hopes of a coronavirus vaccine, said Himanshu Srivastava, associate director (manager research) at Morningstar India.
Noting that the investment in July was lower than that in June, Srivastava said FPIs adopted a "cautious stance" while investing in India as Covid-19 cases continued to surge even as many states implemented fresh lockdown measure, fanning concerns that growth in the domestic economy could be delayed further.
In the last week of July, FPI flows in emerging markets have been mixed, with South Korea and India receiving positive flows, whereas most of other markets witnessing outflows, said Rusmik Oza, executive vice president, head of fundamental research at Kotak Securities. A correction in Dollar index bodes well for FPI flows into emerging markets, Oza said.
Srivastava, however, cautioned that in the times to come, "a surge in coronavirus cases globally, increasing tension between the U.S. and China, and a sharp rise in infections in India with economy still limping may act as a deterrent for foreign investors".
On domestic factors, Oza said, "Forthcoming results would mainly be from the hard core manufacturing sector which may disappoint. Hence, FPI flows could remain mixed."
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