Dec FPI investment in India at Rs 54 bn on softer crude, stronger rupee

Foreign investors have infused more than Rs 54 billion in the Indian capital markets this month so far on persistent drop in global crude oil prices and strengthening rupee.

This comes following a 10-month high net inflow of over Rs 122.66 billion in the capital markets (equity and debt) by Foreign Portfolio Investors (FPIs) in November.

According to data available with the depositories, FPIs put in a net amount of Rs 19 billion in equities and Rs 35.77 billion in the debt markets, taking the total to Rs 54.77 billion during December 3-28.

"The inflow in Indian capital markets are a result of persistent fall in crude oil price, which has dropped by almost 40 per cent in the last three months and strengthening rupee against the US dollar over the same period," said Harsh Jain COO at Groww, an online MF investment platform.

However, till December 7, FPIs were net sellers in the equity market, pulling out funds to the tune of Rs 3.83 billion. However, they had put in Rs 27.44 billion in the debt markets during the period under review.

"The sell-off was triggered on December 6, when FPIs sold net assets worth Rs 361 crore in a single day. This could be largely attributed to the weakness in the global markets due to the arrest of a high-profile Chinese executive which led to a sharp fall in the stock markets globally," said Himanshu Srivastava, senior analyst manager research, Morningstar Investment Adviser India.

"Investors fear that the relationship between the world's two biggest economies -- the US and China -- could deteriorate following the arrest and hurt economic growth. Consequently, they chose to adopt a cautious stance and shun risky assets, such as their investments in emerging markets like India, which are more susceptible to weak global cues," he added.

The sell-off by FPIs was triggered after Chinese telecom giant Huawei's CFO Meng Wanzhou, who is also the company founder's daughter, was arrested in Canada for extradition to the US for suspected Iran sanctions violations.

FPIs have pulled out over Rs 825 billion from the capital markets so far this year. This includes over Rs 333 billion from equities and Rs 492 billion from the debt market.