After two months of intense selling, foreign investors turned net buyers in October to invest over Rs. 3,000 crore in stocks, enthused by the government’s Rs. 2.11 lakh crore bank recapitalisation plan.
The latest inflow followed a net pullout of Rs. 24,000 crore from stock markets in the past two months (August and September). Prior to that, FPIs had invested over Rs. 59,000 crore in equities between February and July.
According to depository data, foreign portfolio investors (FPIs) infused a net sum of Rs. 3,055 crore in equities last month.
FundsIndia.com Head of Mutual Fund Research, Vidya Bala, said FPIs continued their net selling streak in October until the government’s announcement of recapitalisation of public sector banks and an over Rs. 6 lakh crore outlay for road development.
“The trend reversed as they pumped money immediately after the announcement. Recapitalisation of banks, and infrastructure spending are viewed by FPIs as providing a fresh lease of life for economy and markets,” she added.
Finance Minister Arun Jaitley on October 24 announced a recapitalisation programme of Rs. 2.11 lakh crore for PSU banks, of which Rs. 1.35 lakh crore will come from recap bonds, and the rest from markets and budgetary support.
Further, India moving up in the World Bank ranking of ’ease of doing business’ also buttressed positive sentiments, said Himanshu Srivastava, Senior Analyst Manager Research at Morningstar India.
Additionally, a slight improvement in global sentiments and stable currency could have also turned the tide in India’s favour, he added.
Going forward, FPI flows may sustain as second quarter earnings are progressing well, Sharekhan Head Advisory Hemang Jani said.
Apart from equities, overseas investors infused a staggering Rs. 16,000 crore in the debt segments last month due to “high nominal and real yields”.
“Indian bonds remain attractive on high nominal and real yields as well with the backdrop of macroeconomic stability and hence it continues to attract FPIs,” Quantum Adviors Head Fixed Income and Alternatives Arvind Chari said.