The current financial year has had the best start in a long time in terms of inflows from foreign portfolio investors (FPIs), and it is playing a key role in pushing the benchmark indices to record levels.

In the first two months of the current fiscal, FPIs have invested a net amount of ₹29,113 crore in Indian equities, the highest-ever in the last 17 years since data became available. Moreover, this is only the fourth time that net foreign inflows had crossed ₹20,000-crore in just two months at the start of a financial year.

The previous high in terms of cumulative flows from FPIs in April and May was seen in 2013-14 when such institutional investors poured ₹27,583 crore in Indian equities. In 2009-10 and 2014-15 as well, the Indian equity market saw sizeable inflows from FPIs to the tune of ₹26,625 crore and ₹23,608 crore respectively.

Incidentally, the first two months of 2018-19 saw the highest outflows from foreign investors when they pulled out ₹15,662 crore from the stock market.

A strong mandate for the BJP government, leading to prospects of further reforms and continuity of economic policies made overseas investors bullish on Indian equities, said market participants.

“The re-election of the incumbent government with an even higher majority indicates policy and stability to the global community,” said Arindam Chanda, CEO, IIFL Securities.

“The inflows could be even higher now as some large foreign portfolio investors, who were waiting for election results, will now invest in Indian equities. If the government continues with the right economic reforms, brings growth back on track and manages fiscal deficit well, we could see a prolonged period of foreign fund interest in India,” added Mr. Chanda.

The election results have indeed made market participants quite bullish on stocks with expectations of a revival in earnings and an ensuing re-rating of the markets.

“Earnings could be heading into a new cycle and domestic flows should return with strength,” said Morgan Stanley in a report while pegging its June 2020 target for Sensex and Nifty at 45,000 and 13,500, respectively.

The effect of the strong inflows is evident with the benchmark Sensex and Nifty hitting record highs almost on a daily basis.

The 30-share Sensex breached the 40,000-mark for the first time ever during intraday trades on the day election results were announced.

Also, the Sensex closed above the 40,000-mark for the first time on June 3 while the broader Nifty closed above the 12,000-mark.