Indian two thousand rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

NBFCs Receive Highest Foreign Fund Inflow In Eight Months

Non-banking financial companies received the highest foreign inflows in eight months as overseas investors turned net buyers into Indian equities after a two-month selloff.

The foreign portfolio investors pumped in $352 million last month in NBFCs, the highest in eight months, according to the National Securities Depository Ltd. data.

The NBFCs received boost from the Reserve Bank of India’s decision to ease liquidity. The central bank allowed banks to offer partial credit enhancement or backing to bonds issued by some of these firms to improve their creditworthiness. It also reduced by half the minimum time for which non-bank lenders have to hold loans on their books before they are allowed to sell them.

FPIs sold Indian equities in September and October as the rupee weakened and defaults by IL&FS group entities triggered a liquidity crunch. They returned in November as crude prices fell and the Indian currency strengthened. Overseas investors infused over $850 million (around Rs 4,900 crore) in the equity market in November, with inflows totalling $713 million in the second half. That’s in line with the performance of the equity markets as Nifty 50 rose 4.72 percent in November after falling for two months in a row.

What Foreign Investors Bought And Sold In October

The NBFCs remained at the top of foreign investors’ shopping list last month. They infused about $174 million in pharmaceuticals and biotechnology stocks—of which $126 million came in the last 15 days.

Banks Bore The Brunt

Foreign investors were net sellers of banking stocks for the fifth straight month. They pulled out $120 million from lenders’ shares, NSDL data showed.

The selloff in banks was followed by metals and mining stocks—foreign investors net sold shares worth $116 million.

Foreign fund have net sold debt and stocks worth Rs 86,000 crore so far this year, with Rs 34,000 crore outflows from the equity markets.