For NRI flows, May 2018 is the best in nearly five years

If the investments by non-resident Indians (NRIs) in the domestic equity markets are anything to go by, then they have never been so bullish in the last five years. At a time when foreign investors have been selling Indian shares in huge quantum, overseas based Indians have increased investments to record levels.

According to data available with BSE, NRIs are net buyers of Indian shares at ₹78.50 crore in May, which is the highest since June 2013, when they bought equities worth ₹115.80 crore in a single month.

Incidentally, this is also the third-best month ever in terms of flows, with the highest net flows registered in March 2013 at ₹142.80 crore.

NRIs are allowed to invest in Indian shares under the portfolio investment scheme (PIS) by opening an NRE (Non Resident External) account and thereafter a demat account. While such investors are allowed to invest in Indian shares, they are barred from doing intra-day trading.

Market participants, who deal with NRI clients, attribute this trend to the twin factors of rupee depreciation and a lacklustre performance of other asset classes, especially real estate in West Asia.

“There is definitely an increase in activity after the rupee depreciation. Also, there are lot of uncertainties in the Middle East markets and we have even seen clients taking money out of the markets there from other assets and investing in the Indian equity market,” said C.J. George, managing director, Geojit Financial Services, which has one of the largest number of NRI clients among Indian brokerages.

Interestingly, while there are NRIs settled in the U.S. and U.K. as well, those settled in West Asia mostly invest in Indian shares, while the ones in other places prefer investing in assets in the country of their residence.

FPI outflows

Further, the record flows from NRIs have come at a time when foreign portfolio investors (FPIs), which are often looked upon as prime drivers of a bull run, have been selling Indian shares in huge quantum.

In May, FPIs have been net sellers at nearly ₹9,500 crore.

The benchmark Sensex has also lost marginal ground in May after gaining more than 6% in April. In the current calendar year, the Sensex has gained 2.62% even as the near-term outlook of most market participants is cautious due to a combination of global and domestic macroeconomic and geopolitical reasons.

“NRIs are typically long-term investors and so they are relatively less bothered about the short-term volatility in the market. While there has not been a spike in client additions, the per client activity or investment has surely gone up. The data also shows that people are allocating more of those savings in equity market,” he added.