Mumbai: The liquidity infusion by the Foreign Portfolio Investors (FPIs) have continued to remain unabated and that is the sole reason for the benchmark indices and its constituents maintaining high price levels in the domestic markets.
FPIs have pumped in a net amount of Rs 23,102 crore in February so far driven by positive sentiment around the budget and RBI's decision to maintain an accommodative stance in the latest monetary policy.
As per the data provided by the Depositories, FPIs invested a net sum of Rs 10,750 crore into equities and Rs 12,352 crore into the debt segment, taking the total net investment to Rs 23,102 crore, during February 3-20. FPIs have been net buyers in the Indian markets since September 2019, the data also showed.
Also, internationally, the US Fed and European Central Bank (ECB) are expected to continue their lenient view on the interest rates, which will force them to stay invested in the emerging markets like India, where rate of return from both Equities as well as Debt markets are much attractive compared to the developed western markets.
Going forward, "FPIs don't expect the Fed and European Central Bank to tighten policy soon. FPI flows will continue so long as the leading central banks are in accommodative monetary policy," V K Vijayakumar, chief investment strategist at Geojit Financial Services said.
Despite the challenges faced by the domestic economy and slow pace of growth in corporate earnings the move by the Government to remove Dividend Distribution Tax (DDT) in the budget and the Government's proposal to increase the FPI limit in corporate bonds from 9 per cent to 15 per cent has helped FPIs regaining their confidence back.
Additionally, fixed income markets have witnessed positive flows largely on the back of RBI's decision to maintain an accommodative monetary policy stance, He said.
Globally there has been a risk-off sentiment among foreign investors with the outbreak of coronavirus epidemic. FPIs have been particularly wary of investing in markets, which rely on tourism, as the spread of virus can adversely impact their prospects and economic growth.
"From this perspective, Indian equity market is better positioned among such group of countries and hence it has been attracting foreign flows," he added.