Amid concerns over trade war & domestic growth, FPI inflow slows down in June

The Indian Express
July 02, 2019
ENS Economic Bureau

Between January and June, FPIs have pumped in a net of Rs 77,322 crore, the highest in the first six months in any year.

Indian agriculture has reached a stage where more the govt intervenes, lower will be the growth: NITI Aayog member Ramesh Chand

While March this year witnessed the highest ever fund inflow into equities in a month by FPIs at Rs 33,980 crore, it stood at Rs 2,272 crore in June.

Even as the ruling NDA government came back to power and the Bharatiya Janata Party secured a majority on its own in the general elections concluded on May 2019, domestic growth concerns, global trade worries and slow progress of monsoon in India weighed over the minds of foreign portfolio investors (FPIs) as they significantly reduced the pace of fund inflow into Indian equities in June.

While March this year witnessed the highest ever fund inflow into equities in a month by FPIs at Rs 33,980 crore, it stood at Rs 2,272 crore in June.

Between January and June, FPIs have pumped in a net of Rs 77,322 crore, the highest in the first six months in any year.

February, March and April witnessed strong FPI inflows, which declined a bit in May and then reduced further in June. The pace of FPI flows had a bearing on the stock market performance. While the Sensex at the BSE increased by 10.7 per cent in the three-month period between March and May, it fell marginally by 0.8 per cent in June 2019.

Experts say that both traders and investors are waiting for a series of events at this point of time, including the trade discussions on the sidelines of G20 summit in Japan. While the meeting of the world’s 20 major economies is expected to calm the nerves across the global markets, India’s discussions with the United States on the tariff issue would calm domestic sentiments. Besides, the market would also be closely watching the forthcoming events, such as presentation of the Union Budget on July 5, and will see what steps the government takes to boost economic growth.

Markets reflect slowing FPI inflow

Between January and June 2019, FPIs have pumped in a net of Rs 77,322 crore, the highest in the first six months in any year. The pace of FPI flows has, however, been slowing down. This has had a bearing on the stock market performance. While the BSE Sensex rose by 10.7 per cent in the three month period between March and May, it fell marginally by 0.8 per cent in June 2019.

Looking at the much talked about debt crises and defaults, while the Securities and Exchange Board of India (Sebi) recently tightened the reins with stricter disclosures and stringent regulations to discipline investments by mutual funds, it remains to be seen as to what steps does the government announce.

Jimeet Modi, founder and CEO, Samco Securities, said, “The lacklustre vibe before the Budget can be the calm before the storm and markets are expected to remain muted and sideways, but there is likelihood of downward pressure. The auto sector is at the tipping point. Depending on how the government provides support, these stocks will either revive or fall off the cliff.”

“Other sectors which are likely to benefit from the Budget would clearly be low cost housing, agriculture and infrastructure as the government knows very well the multiplier effect to attain the growth and employment targets. Investors should still follow a wait and watch approach,” he added.

With growing concerns both on global trade front and uncertainty in equities and debt, while investors are moving to safer havens such as gold, FPIs may also look for government’s growth push before they regain confidence to park their funds in India.

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