Foreign Funds Invest More Than $30 Billion In Indian Markets In 2017
Foreign funds invest more than $30 billion in Indian markets in 2017:
Foreign investors have been gung-ho about the Indian capital markets in the year 2017 as the ‘suave investors’ have poured over $30 billion (more than Rs 2 lakh crore) in one of the fastest growing economies of the world. In fact, investors have invested over $8 billion, an amount bigger than the cumulative investment of the previous two years, in the Indian equities alone.
The investment positions in the equities so far in 2017 is Rs 55,000 crore, which is the highest in three years as in 2016 it was Rs 20,500 crore and Rs 17,800 crore in 2015. To be sure, however, the sum is much lower than the amount of INR 97,000 crore in 2014, INR 1.13 lakh crore in 2013 and INR 1.28 lakh crore in 2012.
Foreign Funds Invest More than $30 Billion in Indian Markets in 2017
What is interesting is that FPI inflows into debt markets have seen a huge turnaround with net investments totalling INR 1.5 lakh crore ($23 billion) compared to the net outflow of about INR 43,600 crore in 2016. If we talk about overall net inflows, then 2017 has been the best time period for Indian capital markets (both equity and debt) as far as an overseas investment are concerned (in three years) with a combined net inflow of around $ 30 billion or INR 2 lakh crore.
The cumulative net investment of Foreign Portfolio Investors (FPIs) in the Indian equity market (coupled with the investment made in 2017), since being allowed over two decades ago in November 1992, has swelled to INR 8.75 lakh crore. In terms of the debt market, a cumulative figure is around INR 4.2 lakh crore. Clubbing the figures for both debt and equities, the figure is a humongous INR 13 lakh crore (USD 252 billion).
It is to be noted that the money poured by FPIs is called the 'hot money' due to the rather unpredictable nature; however, these overseas investors have been among the most important drivers of Indian stock markets in the recent times. Experts, in fact, have opined that such lavish FPI flows may not continue in 2018 owing to the gradual withdrawal of liquidity, rate hikes by the central banks of the developed economies, the uptick in the inflation trajectory due to increase in commodity prices and recovery in consumer demand.
To be sure, FPIs turned set sellers in August & September, pulling out more than INR 24,000 crore during the two months because of the rise in risk aversion due to increased geopolitical tensions (as the standoff between the US and North Korea escalated), the slowdown in the domestic economy and profit booking. However, the trend reversed after the Union Government's announcement of recapitalization of the PSU banks and India’s upward jump in the World Bank's ‘Ease of Doing Business Index’.