FPIs Invest Rs 18,589 Crore In First Week Of June As Sentiment Improves

Foreign portfolio investors have pumped in Rs 18,589 crore into Indian markets in the first week of June as sentiment improved amid graded lifting of lockdown curbs.

Also, Reliance Industries Ltd.’s mega rights issue, which closed during the week and was oversubscribed, and a stake sale of 2.8% by Uday Kotak in Kotak Mahindra Bank Ltd. attracted significant foreign flows, said Himanshu Srivastava, associate director-manager research at Morningstar India.

During the first five trading sessions of June, overseas investors put in a net sum of Rs 20,814 crore in equities but pulled out a net Rs 2,225 crore from the debt segment.

The total net investment between June 1 and June 5 stood at Rs 18,589 crore.

Prior to this, foreign portfolio investors were net sellers for three straight months. They withdrew Rs 7,366 crore in May, Rs 15,403 crore in April and a record Rs 1.1 lakh crore in March.

Market sentiment has improved as the Indian government announced an overall Rs 20-lakh-crore economic relief package to tide over the challenges posed by the Covid-19 pandemic and the lockdown, according to Bajaj Capital Research.

“The global crude price’s spectacular recovery by surging 40% during May and slowdown in global infection growth helped to revive the risk-on sentiments among the investors,” it said.

Morningstar’s Srivastava, however, said the investment environment continues to be grim as almost all global economies are staring at a recession.

The simmering tensions between the U.S. and China also do not augur well for emerging markets like India, which are more vulnerable towards geopolitical risks.

Though foreign investors have returned to invest in the Indian equity markets, it needs to sustain to call it a change in trend and not a short-term investment opportunity, he said.

If the situation worsens, foreign investors can again switch back to the risk-averse mode, he said.

According to Harsh Jain, co-founder and chief operating officer of Groww, “There is a sense of optimism in the markets and a belief that the worst is behind us in terms of market performance.”

FPIs have been investing in fundamentally strong bluechip companies and this trend is likely to continue in the near future. More money will flow into market leaders. Strong companies are likely to be able to weather and even take advantage of challenging times, Jain said.

FPI inflows into India, however, do not depend just on Indian factors and the global economic scenario also greatly impacts investor sentiment, he said.

“The ongoing tension between the U.S. and China, the economic situation in the U.S., and the upcoming U.S. elections all are factors that will affect FPI investment in India for the rest of FY21,” he said.