Key reasons why foreign investors infused Rs 30,000 crore in Indian stocks in November

After remaining net sellers for the past two consecutive months, foreign portfolio investors returned to Dalal Street in a big way, pumping over Rs 31,000 crore into domestic stocks in the ongoing month till November 25. Following the heavy buying by global investors, the benchmark equity index also scaled its all-time high of 62,447.73 on November 25. On a month-to-date basis, the index gained over 2.5 per cent so far. On the other hand, domestic institutional investors offloaded shares worth over Rs 1,500 crore during the same period.

Market watchers believe that factors that are driving the India growth story and attracting foreign investments are the highest-ever tax collection numbers, upward shift in domestic consumption due to the festive season, reporting of positive corporate earnings, strong valuations and successful IPOs.

Commenting on the robust inflow by foreign portfolio investors, Manoj Purohit, Partner & Leader-Financial Services Tax, BDO India said, “Government efforts in announcing regulations for attracting offshore investors for capital infusion in start-ups, angel funds and promoting digitisation, innovation and the technology space. Other emerging markets such as Brazil, Indonesia and Taiwan are also seeing a similar trend in terms of foreign cash flows.”

Data available with NSDL showed that the total investment by FPIs have increased in sectors including financial services, metals and mining, information technology and capital goods among others from October 31 to November 15.

Will the inflows by FIIs sustain? Purohit expects the aggressiveness in pumping cash into equities to continue in the coming months. “With the slowing down on hiking of rates, inflation under control and the economy being well incubated, we see no reason for India to not be in the leading position and most preferred choice by the international community, not only for equity but also other markets in the long term.”

On the other hand, VK Vijayakumar, Chief Investment Strategist, Geojit  Financial Services said, “FPIs are unlikely to be major sellers, going forward since their earlier policy of continuous selling in banking has cost them heavily. When FPIs were sellers earlier, DIIs were buyers and they gained from the FPI policy of sustained selling. Now the market construct in the US has changed to “rising equity, falling yields and falling dollar”. This is favourable for the continuation of FPI flows, going forward.”

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