Budget, reforms spur FPI flow to India

Foreign portfolio investments (FPI) flow into the Indian equity market recorded a big jump over the past two weeks following the federal budget for fiscal 2021-22 amid positive sentiments driven by a spate of reforms and an improved “ease of doing” business ecosystem.

FPIs have pumped more than Rs390 billion into equities since January, of which the major bulk of Rs205.93 billion flowed into the market in February alone in the wake of a budget that has raised positive sentiments among the global investor community.

S. Ranganathan, head of Research at LKP Securities, noted that several reforms aimed at protecting shareholder rights as well as improved ease of doing business environment have been driving the FPIs. Sectors like private banks, consumer, FMCG and IT have witnessed brisk foreign flows with companies exhibiting resilience and growth following the lifting of lockdown restrictions in October-December quarter of fiscal 2020-21.

“We expect foreign flows to be positive in the current quarter as well in line with the trend so far as the budget has been a growth-focused one with privatisation gaining ground,” he said.

Further, hopes on the Covid vaccination front and the government’s push for capital expenditure and infrastructure boost have also led to positive sentiments among investors, analysts said.

As per the budget announcement, the government has included amendments to various financial legislation in the Finance Bill, 2021 to permit debt financing of InvITs and Reits (infrastructure and real estate investment vehicles) by FPIs.

In the budget speech 2021-22, it has been announced that “debt financing of InvITs and Reits by FPIs will be enabled by making suitable amendments in the relevant legislations.”

Analysts said this would pave the way for easy access of finance to InvITs and Reits thus augmenting funds for infrastructure and real estate sectors.

They said as the Indian stock market remains largely bullish with intermittent correction and consolidation, wholesale inflation data, global cues along with the trend in the foreign institutional investments (FII) driving the domestic indices in the coming week.

Siddhartha Khemka, head of Retail Research, Motilal Oswal Financial Services, noted that post the sharp rally after the budget, the Indian equity market saw some consolidation in the week ended Friday, although it ended on a positive note.

Global cues were mixed as prospects of higher US fiscal stimulus and larger vaccine rollouts globally, along with dovish Federal Reserve outlook kept the overall mood positive, he said.

— issacjohn@khaleejtimes.com