Foreign investors remained net buyers in the first half of February by investing a net sum of Rs 24,617 crore in the Indian markets due to positive sentiments post-Budget and the central bank's decision to maintain an accommodative stance in its recent monetary policy review.
As per the depositories' data, Foreign Portfolio Investors (FPI) pumped in a net sum of Rs 10,426 crore into equities and Rs 14,191 crore into the debt segment between February 3 and 14. This adds up to a total net investment of Rs 24,617 crore.
FPIs have been net buyers in the Indian markets since September 2019, the data showed. "The recovery in the markets post-Budget has largely been supported by DIIs (domestic institutional investors)," Ajit Mishra, vice-president (research) at Religare Broking Ltd, said.
Finance Minister Nirmala Sitharaman in the Union Budget proposed to remove dividend distribution tax (DDT) on companies and, henceforth, the tax burden will be shifted to recipients at the applicable rate. Besides, she also said certain government securities will be open for foreign investors adding that the Centre plans to increase investment limit for FPIs in corporate bonds from 9 percent to 15 percent.
However, the buying in equities has been nominal in February so far as "the subdued FPI sentiments are a result of coronavirus outbreak's impact on global economic growth," Mishra said. Citing reasons for investment in the bonds market, analysts said the investment was largely on the back of the RBI maintaining an accommodative stance in its recent monetary policy review.
On the future course of FPI flows, Mishra said that "in the medium term, FPI flows should increase as the domestic economy rebounds and global concerns subside".