Foreign Institutional Investors (FIIs) are making a thumping comeback in Indian markets after an eight-month lull, where they sold Indian equities worth Rs 2.46 crore. This month, they have already bought equities worth Rs 40,000 crore.
India had seen a net influx of $0.5 billion worth of FII funds in July, which skyrocketed to $4.7 billion this month.
According to the Reserve Bank of India (RBI), India is set to become the preferred choice for most global portfolio flows. Sound corporate health and economic fundamentals are other factors playing well for India.
A part of this is attributable to rising inflation rates among many emerging economies such as Turkey, Indonesia, Philippines and South Africa.
GLOBAL MENACE
Investors are fleeing Turkey as it slashed its benchmark interest rate from 14% to 13%. Despite battling a record-high 80% inflation rate, the country’s premier Recep Tayyip Erdogan has thrown all economic caution to the wind. How? By batting for lower interest rates. This, even when global central banks such as US Fed are aggressively ramping up their interest rate to crunch market liquidity and contain inflation.
Indonesia’s inflation rate has grown to 4.94%, the highest in seven years. However, at 3.5%, its central bank is holding the interest rate steady since last year.
Philippine’s apex bank, the Bangko Sentra ng Pilipinas, has also raised its 2022 inflation forecast to 5.4%, from its earlier projection of 5%. July saw inflation in the country surge to 6.5%.
IS INDIA BETTER OFF?
Currently, the market value of India’s investment portfolio is a massive $623.8 billion. Analysts are hopeful that inflation will ease below 6% by March 2023. Inflationary pressures dropped to 6.7% last month, as opposed to 7.01% in June. What changed?
Agra-based investor Nitin Sovani says, “The ongoing Russia-Ukraine war has been routinised by the global financial market. Earlier, this war was causing financial uncertainties. The depreciation in the US dollar against the rupee is another factor causing the inflow in India”
Experts believe that India is a fertile ground for investment opportunities. With political and economic instabilities looming large in neighboring China and Taiwan, India appears to be a safe bet.
Rajeev Ranjan Jha, market expert, and editor of Hindi investment magazine Nivesh Manthan, explains, “There are indications of economic conditions improving in the US. And if the situation in the USA improves, the global markets benefit. “
“Back in October 2021, when Indian markets were appearing over-priced, Foreign Portfolio Investments (FPI) were on a selling spree. Inflation and the price of crude oil, too, were big worries. But these worries have been soothed to some extent,” he says.
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