Foreign investors reduce their India bets by 75% after investing over ₹20,000 crore earlier in June

Foreign investors reduce their India bets by 75% after investing over ₹20,000 crore earlier in June
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  • While foreign portfolio investors (FPIs) pumped in big money in the first half of June, the net inflow for the month has reduced by 75% by the end of it.
  • Before May, foreign investors had pulled out nearly ₹88,000 crore from the Indian markets, triggered by concerns around COVID-19.
  • The net foreign portfolio investment (FPI) flow turned positive for the first time in May, with FPIs investing over ₹13,179 crore in the month.
Foreign investors have reduced their India bets by 75% in the last 15 days of June after investing over ₹20,000 crore earlier in the month.

While it seemed as if global investors were slowly returning to the Indian market, the subsequent withdrawals suggest that the picture is not as rosy as it seemed initially.

Even though the net FPI flow in May was higher at ₹13,000 crore — compared to ₹9,400 crore in June — it was primarily driven by an investment of over ₹19,000 crore in Hindustan Unilever (HUL).

However, what might seem as a silver lining is that FPIs were slightly more consistent this month in comparison with May. The inflows and outflows were more predictable, and were not completely influenced by any single event. The India-China border tensions which peaked on June 15 and 16 did trigger a sell-off of over ₹4,400 crore, but barring that, there were no other significant factors triggering FPI outflows.

According to data obtained from the stock exchanges, net FPI flows in June 26 stood at ₹5,493 crore in the cash market. In the index futures, the overall flow was negative at ₹4,379 crore while the stock futures remained positive at ₹3,331 crore.

Foreign investors reduce their India bets by 75% after investing over ₹20,000 crore earlier in June
FPI inflows in Indian markets till June 2020NSE / Business Insider India / Flourish

Why are FPIs important for India?

FPIs bring in a considerable amount of money into the Indian market. The shortfall of funds from domestic investors is made up for by FPIs, and they act as catalysts of market performance.

FPIs include hedge funds, investment banks, mutual funds and pensions funds.

FPI flows have been more consistently positive in June

While the net FPI flows were higher in May in comparison to June, the overall FPI flows have been more consistent this month.

The primary reason behind positive flow in May was the investment of over ₹19,000 crore in HUL, and without that, the flows would have remained negative.

In June, however, out of the 20 trading sessions so far, FPIs have been net positive in 12 sessions, bringing in an average of ₹1,452 crore per session.

FPIs banking on attractively priced equities?

Analysts suggest equities are attractively priced after the market crash due to the COVID-19 outbreak in India.

“Currently, the valuations are still compressed, and equities are attractively priced, which is a good buying opportunity,” Himanshu Srivastava, associate director-manager research at Morningstar India, told PTI.

“With a relatively long-term investment horizon, Indian equities could be a good investment option for FPIs especially once the COVID-19 crisis is resolved and the current market trend reverses,” he further added.


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