FPIs infuse over Rs 13,300 crore in equities in April so far amidst bullish economic outlook

Foreign investors have infused over Rs 13,300 crore in Indian equities in the first two weeks of the month owing to a resilient domestic economy with promising growth prospects. Going ahead, concerns over changes in India-Mauritius tax treaty will weigh on Foreign Portfolio Investor (FPI) inflows in the near-term till clarity emerges on details of the new treaty, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

Another major concern is the surcharged geopolitical situation in the Middle East with heightened tensions between Iran and Israel. These will keep the markets on tenterhooks in the near-term, he added.

Since domestic institutional investors (DIIs) are sitting on huge liquidity and the retail and HNIs in India are highly optimistic about the Indian market, FPI selling will be largely absorbed by domestic money.

According to the data with the depositories, FPIs made a net investment of Rs 13,347 crore in Indian equities this month (till April 12).

Although, Friday witnessed FPI selling to the tune of Rs 8,027 crore on fears of changes in India-Mauritius tax treaty.

Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said that several factors might have helped in the huge inflow including Fitch’s downgrade of China’s sovereign credit rating outlook from stable to negative due to growth concerns. In addition, anticipation of a normal monsoon season this year that could alleviate inflationary pressures, and a resilient domestic economy with promising growth prospects too helped in massive inflows, he added. Apart from equities, FPIs have made a net investment of Rs 1,522 crore in the debt market during the period under review.

FPIs have been pumping money in the debt markets for the past few months driven by upcoming inclusion of Indian government bonds in the JP Morgan Index.

They invested Rs 13,602 crore in March, Rs 22,419 crore in February, and Rs 19,836 crore in January.

JP Morgan Chase & Co. in September last year announced that it will add Indian government bonds to its benchmark emerging market index from June 2024.

This landmark inclusion is anticipated to benefit India by attracting around USD 20-40 billion in the subsequent 18 to 24 months.

Overall, the total inflow for this year so far stood at Rs 24,241 crore in equities and Rs 57,380 crore in debt market.