Foreign portfolio investors trust India, record investment in 2020
Foreign portfolio investors (FPIs) have made a record investment of Rs 1.4 lakh crore in the Indian stock markets in 2020 this year, amid attractive valuations, better liquidity position and a weak trend in the US dollar. This is the all-time high level of their investment.
However, amidst pressure on the economy from the Covid-19 epidemic, foreign investors have also made record withdrawals from debt or bond securities. According to the latest depository data, the FPI has withdrawn over Rs 1 lakh crore from the bond market so far this year. However, it has a net investment of Rs 10,000 crore in hybrid securities.
India benefits from some important developments regarding the Covid-19 vaccine
Market analysts say that if there is no major change in the overall investment scenario, this trend will continue for the next few months. Research director Himanshu Srivastava, associate director-manager of Morningstar India, said India would benefit from some important developments regarding the Covid-19 vaccine. Apart from this, improvement in the economy will also improve investor sentiment and their outlook towards India. In such a situation, India will remain an attractive investment destination.
He said that if the economy remains weak for a long time, it will prove to be a major obstacle. In addition, if another wave of the Coronavirus pandemic causes lockdown measures to be implemented again, this will affect perception and foreign investors will avoid taking risks.
The year 2020 is about to end. So far FPI has invested Rs 1.42 lakh crore net in shares this year. This is his highest investment in any calendar year since 2002.
This is the fifth occasion in history when FPI’s net investment in shares has crossed Rs 1 lakh crore in a year. Earlier in 2019, FPI invested a net of Rs 1.01 lakh crore in shares. Its net investment was Rs 1.13 lakh crore in 2013, Rs 1.28 lakh crore in 2012 and Rs 1.33 lakh crore in 2010.
Withdrawal of Rs 1.07 lakh crore from debt or bond market
On the other hand, FPIs have withdrawn Rs 1.07 lakh crore in 2020 from the debt or bond market. However, during this, it has invested Rs 23,350 crore in loan-VRR. The Reserve Bank launched the Voluntary Retention Route (VRR) in March 2019 to attract long-term steady investment of FPIs in the debt markets.
FPIs investing through this route are exempted from a number of regulatory regulations related to FPI investment in the bond market if they commit to voluntarily hold a minimum percentage of their investment in India for a fixed period.
In the year 2020, FPI has made a record withdrawal from the bond market. Earlier, FPI had withdrawn a record amount of Rs 50,849 crore from the bond market in 2013. Considering all the investments (shares, bonds, bonds-VRR and hybrid) of FPIs, their net investment in Indian markets in 2020 has been Rs 68,200 crore. There are a few business sessions left this year.
