FPIs pour in Rs 1,624 cr in Jan so far as US-China deal boosts sentiment

Foreign portfolio investors (FPI) have infused a net sum of Rs 1,624 crore into the Indian capital markets in January so far, buoyed by the signing of the first phase of the US-China trade deal.

According to the latest depositories data, FPIs invested a net Rs 13,304 crore in equities and withdrew a net Rs 11,680 crore from the debt segment between January 1-24. This translates into a total net inflow of Rs 1,624 crore.

"After starting the year on a muted note, investments from FPIs has picked up pace and most of that flows came after US and China signed a trade deal putting the trade war between them on a pause," said Himanshu Srivastava, senior analyst manager research at Morningstar Investment Adviser India.

The latest investments came despite challenges such as enhanced geopolitical tension between the US and Iran and dwindling domestic economic growth, Srivastava noted.

On the domestic front, "there are some signs of India shaking away the slowdown with business activity picking up and this is reflecting in the investments coming into equities. Besides, after the limit to which FPIs can invest in debt instruments has been increased, more inflows into the debt category can be expected," said Harsh Jain, co-founder and COO at Groww.

The Reserve Bank of India on Thursday raised the investment limit for FPIs in government and corporate bonds, a move that is likely to bring in more foreign funds in the country.

According to the current norms, short-term investments by an FPI should not exceed 20 per cent of the total investment of that FPI in either central government securities (including treasury bills) or state development loans.

The same norms are applicable on investments in corporate bonds.

The short-term investment limit has now been increased from 20 per cent to 30 per cent in both the cases, the RBI said in a circular.

Additionally, the RBI has also made relaxation in the voluntary retention route (VRR) for FPI investments in debt. The investment cap through VRR has been doubled to Rs 1.5 trillion, the RBI said in another circular.

Going forward, "all eyes will now be on the upcoming Budget to get further cues. This will play major role in terms of shaping up the investment views of foreign investors and decision to invest in the Indian equity markets," Srivastava added.