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The slowing down of foreign investments in India’s stock market is one key factor that has come in the way of the Sensex and Nifty scaling new peaks.
Even though retail and domestic institutional investors are holding on to the markets after the post-Covid rally since April 2020 till date, data show that the pace of foreign portfolio investors’ (FPI) money flowing into India has been slow. In the first six months of this year, FPIs poured in ₹57,675 crore into Indian markets (across debt, equity and derivatives), compared to the ₹96,457 crore they had put in the first six months of 2019.
Surge in demat
In the first six months of 2020, FPIs had pulled out ₹1,04,482 crore from the markets.
The court of demat accounts at India’s largest depository CDSL crossed the 4 crore mark this last month.
The surge in demat was mainly led by domestic retail accounts, indicating the enthusiasm and euphoria.
There is a view among analysts that the markets will get support from FPI money and, hence, the chances of a major decline need not be a cause for worry. “As nations worldwide are enjoying a steady relaxation of virus restrictions, India is in the grip of arguably the single most violent and overwhelming outbreak the world has seen.
“This has resultant in FPIs snapping their six-month buying spree, as they turned net sellers in April and pulled out ₹1.29 billion, the highest since March 2020,” said a research note from the desk of Mumbai-based research house and broker Edelweiss in its foreign sectoral flow insight’s last edition. The total assets under management of FPIs stood at between $500 to $550 billion.
According to research houses, the top three sectors that saw maximum outflow of FPI money this year were banking and financial, oil and gas, and metals and mining.
Still a large number of metals and mining stocks have managed to rally, mainly due to domestic institutions and retail cash flow.
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