August 22, 2021
The inflows are spread across US$ 302mn in debt and US$ 674mn in equities.
The resumption of economic activities post the lifting of lockdowns, and retail investment has pushed Sensex points higher.
Rate cuts, tapering, fluctuations in Dollar values and global inflation could hamper FPI inflows in India.
Asian economies with the exception of Thailand have seen an increase in the amount of FPI inflows.
India’s Foreign Portfolio Investment (FPI) inflows have risen to US$ 977mn (Rs 7,245 crore) in the month of August 2021, as per news reports. The positive performance in macroeconomic indicators coupled with improved investor sentiment in the market has contributed to this development. During the same period, BSE Sensex reached a record high of 56,118.57 points on Wednesday, August 18. A broader breakdown of the FPI inflow would be across US$ 302mn (Rs 2,244 crore) in debt and US$ 674mn (Rs 5,001 crore) in equities.
Earlier, FPI investments peaked at US$ 3.48bn (Rs 25,787 crore) in February. Mid-cap and large-cap stocks saw great demand in the IT, insurance and fintech sectors. Including the debt sales in June, the total debt sales for 2021 stood at US$ 2.99 bn (Rs 22,151 crore). Market analysts forecast a profitable run for the FPI landscape well into 2022 but are cautiously optimistic in their projections. A favourable festival season coupled with ideal monsoon conditions, a successful vaccination programme, and the appreciation of the dollar are factors that could contribute positively towards FPI inflow growth.
As India’s performance on macroeconomic indicators continues to improve, the market will continue to be a promising investment destination for long-term investments albeit with potential for occasional short-term risks. Global inflation is expected to induce volatility in the market rates and indirectly on FPI inflows. Experts maintain that rate cuts and tapering could further exacerbate the uncertainty brought in by fluctuations in global inflation rates. On a global scale, Asian economies including the Philippines, Indonesia, Taiwan, and South Korea exhibited a recovery in FPI inflow.