Experts believe FPIs will keep a close watch on coronavirus pandemic, its spread and likely impact on the economy while making decisions about investment into India.
Foreign portfolio investors' (FPIs') shareholding in NSE-listed companies fell 51 basis points sequentially to 17.68 per cent in the quarter ended March 31, 2024, according to data compiled by PRIME Database. This is the lowest FPI shareholding since December 2012. From the recent peak of 21.21 per cent at the end of December 2020, FPI shareholding is down 353 basis points.
Diwali fireworks are expected to continue on Dalal Street next week, with four companies collectively seeking to mobilise over Rs 6,600 crore through initial public offerings (IPOs). In terms of the amount raised, this is poised to be the busiest week of calendar year 2023. Tata Technologies (Tata Tech), a subsidiary of Tata Motors, could lead the charge with an IPO projected to be over Rs 2,900 crore. This will mark the first maiden share sale by a Tata Group firm in nearly two decades.
The uncertainty over the gravity of the pandemic's impact on the global economy and financial markets worldwide triggered a flight to safety among foreign investors as they rushed to exit from relatively riskier investment destinations, such as emerging markets like India, a report said.
However, it is noteworthy that foreign investors pumped in money on the day of election results as the mandate became clear
Several institutional investors were ineligible to invest in these companies as they failed to meet the disclosure norms
The RBI had in the past expressed its concerns about allowing foreign investors in short-term paper, because it attracted hot money.
FPIs' ownership in NSE-listed companies reached a five-year high of 22.74 per cent in December 2020 on the back of huge net inflow of Rs 1.42 lakh crore by such investors in the third quarter.
The directions follow a report by the Indian Cyber Crime Coordination Centre, which has seen a new pattern of transnational cyber-enabled financial fraud and investment scam, impersonating as stockbrokers and company executives.
While three of the top five FPIs - Capital, Government of Singapore, and Vanguard - have seen their investment value more than triple, India's benchmark indices have risen just 70%.
BSE (formerly Bombay Stock Exchange) has seen its market share go past the critical 20 per cent mark in the derivatives segment, intensifying its battle with bigger rival - the National Stock Exchange (NSE) - which, less than a year ago, had a monopoly in this space. In April, the average daily trading volume (ADTV) for BSE stood at Rs 89 trillion, accounting for 20.6 per cent of the overall ADTV of Rs 432 trillion (based on notional volumes for options).
The Securities and Exchange Board of India (Sebi) is in the process of issuing a standard operating procedure (SOP) for designated depository participants (DDPs) regarding disclosures and onboarding of foreign portfolio investors (FPIs), according to a regulatory document seen by Business Standard. DDPs act as a link between the markets regulator and overseas investors. The SOP, framed in consultation with the industry, aims to bring consistency across all players and avoid any form of regulatory arbitrage.
In the entire 2017, FPIs put in a collective amount of Rs 2 trillion in equity and debt markets
Foreign Portfolio Investors (FPIs) have pumped Rs 47,148 crore in the Indian equities in June, making it the highest inflow in 10 months, enthused by the country's steadily improving macroeconomic fundamentals. However, inflows in July may be subdued as FPIs might adopt cautious stance due to the recent comments from the US Federal Reserve, Mayank Mehraa, Smallcase manager and principal partner at financial consultancy Craving Alpha, said. Besides, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said FPIs are likely to turn a bit cautious going forward as valuations in the country are rich from a short-term perspective.
Capital gains tax is no longer exempt even for investors coming via Mauritius, hence FPIs are now classifying it as interest income to save on taxes.
The US Fed interest rate decision, domestic inflation data and global trends would be key driving factors in dictating movement in the market this week, as the Lok Sabha elections outcome and the RBI policy decision are behind us, analysts said. The past week was a roller-coaster ride for investors as markets swung sharply in both directions before closing with strong gains.
While a coordinated aggressive monetary easing from the central banks is most likely to offer some respite in the near-term, it is unlikely to improve the sentiments.
After pumping in close to $20 billion in the preceding five months, foreign portfolio investors (FPIs) have yanked out $220 million from domestic stocks this month. The selling by overseas funds has led to turbulence in the domestic markets, with benchmark indices swinging wildly recently.
The regulator may float consultation papers for FPIs and private equity funds and the final decision will be taken after taking into account views of all the stakeholders
Dealers say foreign investors are now taking keen interest in lower-rated corporate bonds, too
Overseas funds have been spooked by several policy measures taken by the government in the past few years
Indian bonds remained volatile over the past week on uncertainties over the maiden offshore sovereign bonds issuance, according to a report by DBS Group Research.
Foreign investors, according to them, will now wait-and-watch how the economy takes shape in the backdrop of doubts over monsoon, interest rate trajectory and other global events such as the US - China trade war.
Mutual funds (MFs) have stepped up equity purchases after staying on the fence for over two months. Their net equity investments reached a four-month high of Rs 7,700 crore in July, rising for the fourth consecutive month after withdrawing a net of Rs 5,100 crore in April 2023. This trend continued in August, with net investments of Rs 3,400 crore in the first three trading sessions, according to data from the Securities and Exchange Board of India.
Foreign portfolio investors' (FPIs') net investment in the domestic debt market in October was the third highest during the current calendar year as foreign investors rushed to lock in higher returns amid global uncertainty and geo-political tensions, market participants said. FPI inflows in debt stood at Rs 6, 322 crore in October against Rs 768 crore in September, according to data on the National Securities Depository Limited (NSDL). Market participants said that the majority of the inflows were channelled through corporate bonds.
Covid-19, US yields, dollar to weigh on equity flows in the near term.
Domestic institutional investors pumped Rs 2.3 trillion into equities during H1 CY24. Of this, mutual funds contributed 80%.
While selling started in April, it has intensified this month, with FPIs pulling out $1.1 billion and $2.5 billion from equities and debt market, respectively
By taking the mutual fund route, investors can take exposure to gilts with small amounts. Over a decade or more, returns from these funds tend to be sound.
Sebi directs freezing of all demat accounts not linked to Aadhaar by December 31
However, they put in Rs 2,744 crore in the debt markets during the period under review.
The spike in volatility, amid election uncertainty, has done little to dent the confidence of retail investors, shows demat account addition and equity mutual fund (MF) investment data. In May, investors opened a net 3.6 million demat accounts, taking the total to 158 million. MF data released on Monday pegged the net inflows into equity schemes and SIP investments at new record highs of Rs 34,697 crore and Rs 20,904 crore, respectively.
The risk-reward ratio could turn adverse for foreign investors if corporate earnings disappoint by wide margins, or if crude oil prices spike in the international market, putting pressure on the rupee-dollar exchange rate.
However, a net amount of Rs 11,119 crore was withdrawn from the debt segment during the same period. This translated into a net investment of Rs 1,003 crore.
The coming Union Budget might give relief to foreign portfolio investors from taxation on indirect transfers.
Since March 2020, when the Nifty50 plummeted to 7,511 following the announcement of a nationwide lockdown, the stock market has been on an upward trajectory. Over the next four years, the major market index has delivered a remarkable compounded annual growth rate (CAGR) of over 31.5 per cent. In the past year alone, the Nifty50 has gained by 27 per cent, hitting a succession of record highs.
The Securities and Exchange Board of India (Sebi) has proposed that at least 10 per cent of corporate bond market trades by foreign portfolio investors (FPIs) should be done on the request for quote (RFQ) platform. At present, most trades in the corporate bond market are over-the-counter (OTC), creating a lot of opacity. The markets regulator has been nudging debt market participants such as mutual funds (MFs), alternative investment funds (AIFs) and brokers to use the RFQ platform to boost secondary market liquidity and transparency.
Foreign portfolio investors (FPI) have pulled out $3.5 billion from India's equity markets so far this month. The selling comes on the back of election-induced volatility and the rotation of flows from India to China, where stocks are available at half the valuations. If the selling pressure remains at the current level, this will be the highest FPI pullout since January 2023.
The Securities and Exchange Board of India (Sebi) has notified stricter timelines of just seven working days for foreign portfolio investors (FPIs) to disclose vital information. This could include informing their custodians about any false or misleading information about the fund or disclosing any change in structure or common ownership, or control of the investor group. The new changes have been brought into effect from March 14 through a notification amending the Sebi (FPIs) Regulations.
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