Foreign investors have pumped $4.2 billion in the country’s capital market in May due to finalisation of GST rates for bulk of the items and prediction of a normal monsoon. Interestingly, most of the funds have been invested in the debt markets by the foreign portfolio investors (FPIs).
“The differential spread between 10-year bond yields in the US and India is still around 4.5-5 per cent, this, coupled with stable outlook for the Indian currency bodes well for FPI flows into debt market,” Sharekhan Head Advisory Hemang Jani said.
According to latest depository data, FPIs invested a net Rs 7,711crore in equities last month, while they poured Rs 19,155crore in the debt markets during the period under review, translating into a net inflow of Rs 26,866crore ($4.2 billion).
With the latest inflow, total investment in capital markets (equity and debt) has reached Rs 1.21lakh crore this year.
This comes following a net inflow of close to Rs 94,900crore in the last three months (February-April) on several factors, including expectations that BJP’s victory in recently held assembly polls will accelerate the pace of reforms. Prior to that, such investors had pulled out over Rs 3,496crore from debt markets in January.
“The government finalising GST rates and expectation that it will be rolled out on time, in addition to forecast of normal monsoon also led to positive sentiments,” Himanshu Srivastava, Senior Analyst Manager Research at Morningstar India said. Markets and the rupee are surging higher, which offer a good profit booking opportunity for FPIs.