India secures record high net FPI inflows of US$ 34bn

The National Securities Depository Ltd disclosed that India had secured an FPI quantum of US$ 34bn as of March 31, 2021

March 31, 2021

The improvement in global liquidity coupled with effective stimulus measures and sustainability of portfolio investments are factors.

The Rupee has been strengthened by US$ 100bn, lending resilience to the Indian equities market.

FPI levels reached a single day high of US$ 1.50 bn as of November 12, 2020.

Post 2014, the SEBI integrated three types of portfolio into one unified category and focused on debt reduction for external inflows.

As of March 2021, data from the National Securities Depository Ltd reveals that Foreign Portfolio Investment reached a record high of US$ 34bn (Rs 2.6 lakh crore) since the 2012-13 period wherein equity inflow was documented at US$ 18bn (Rs 1.4 lakh crore). The growth is evidence of green shoots in the space despite the disruptions brought about by the COVID-19 pandemic on the global economy. Experts attribute the growth to global liquidity, investment sustainability, the efficiency of stimulus packages announced by the Government, and the resilience of domestic markets. The Indian Rupee has also been strengthened by the addition of US$ 100bn, marking a greater degree of relative recovery in comparison to other developing markets. IBEF notes that FPI investments have been on a rise in November 2020, exhibiting a single-day FPI inflow high of US$ 1.50 bn (Rs 110.56bn) as of November 12.

Historically, FPI inflows in the global markets have been buoyed by forces of globalization and liberalization in the 1998-2008 period. India’s growth in FPIs has been synonymous with multiple factors including stock market growth, current account position, exchange rates, investment rates, government expenditure, and several macroeconomic factors. 2014 saw the SEBI recommend regulatory changes to globalize the Indian market and specify a new integrated investment class for foreign portfolio classes. Prior to this reorganization, three separate classes of investors were recognized namely qualified foreign investors, foreign institutional investors, and sub-accounts. The nation’s strategy has witnessed a significant change from a relatively protectionist attitude towards foreign investment inflows to a cautious acceptance of non-debt capital flows, short-term debt, and ensuring inflow stability from the non-resident Indian population. External inflows are guided by the prioritization of debt reduction. As of 2019, pension funds and foreign mutual funds were the top FPI asset classes that elicited investment with entities from the United States of America contributing the lion’s share.