Foreign investors have pumped in a staggering USD 1.5 billion in the Indian equity markets this month so far, propelled by the government’s Rs 2.11 lakh crore bank recapitalisation plan.

This follows a net inflow of over Rs 3,000 crore in stock markets last month. Prior to that, FPIs had pulled out more than Rs 24,000 crore in the past two months (August and September).

According to depository data, foreign portfolio investors (FPIs) infused a net sum of Rs 9,710 crore (USD 1.5 billion) in equities during November 1-10. However, they pulled out Rs 780 crore from the debt market during the period under review.

The investment by FPIs started after the government’s announcement of recapitalisation of public sector banks and over Rs 6 lakh crore outlay for road development, Vidya Bala, head of mutual fund research at FundsIndia.com said. “The trend reversed (outflow) 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 the PSU bank recapitalisation programme of Rs 2.11 lakh crore, out of which Rs 1.35 lakh crore will come from recap bonds, and the rest from markets and budgetary support.

Furthermore, India moving up in the World Bank ranking of ’ease of doing business’ also buttressed positive sentiment, said Himanshu Srivastava, Senior Analyst Manager Research at Morningstar India.

Additionally, slight improvement in global sentiment 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.

Related Topics