Investment by FIIs in Indian equities hits 2-decade peak
Domestic institutional investor inflows, however, remained at a negative ₹1.38 trillion for FY21
Foreign Institutional Investors (FIIs), the main driver of Indian equities, invested more than ₹2.75 trillion ($37 billion) in the stock markets in fiscal 2020-21, the highest in the last two decades, as per data from National Securities Depository Ltd.
Previously, in fiscal 2009-10, 2010-11 and 2012-13, FII inflows had crossed $20 billion.
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Investments zoomed as central banks pumped in trillions of dollars to try and revive coronavirus-hit economies, creating a gush of liquidity.
India has been a huge beneficiary of the inflows of foreign institutional money into emerging markets. In the absence of domestic liquidity support, foreign investors have been driving the markets. Benchmark indices in India have surged more than 70% in this fiscal so far. In FY2019-20, FII outflow was just $90.37 million.
S. Ranganathan, head of research at LKP Securities said, “FPI (foreign portfolio investors, another term for FII) poured ₹22,300 crore into Indian equities for March taking their total inflows to $38 billion. The December quarter flows of $20 billion were in fact the highest ever in any quarter. FPIs today have emerged as the largest non-promoter owner of financial stocks in India as of the December quarter and we expect this trend to accelerate further during the March quarter."
Some of the factors that are attracting FIIs to India are hopes of strong economic recovery and earnings growth in the coming years, weak dollar index, vaccine progress, and policy stimulus measures.
With consistent FII inflows, benchmark indices BSE Sensex and Nifty50 gained more than 70% in FY2020-21. The broader markets also participated in the run and outperformed frontline indices, with the Nifty Midcap and Smallcap indices climbing 101.73% and 124.87% respectively this fiscal.
In contrast to robust FII flows, domestic institutional investor (DII) inflows remained at a negative ₹1.38 trillion for fiscal 2020-21. But in March, DIIs turned buyers for the first time since October 2020. So far in March, DIIs have bought ₹941.89 crore. DIIs last purchased equities worth ₹110.30 crore in September 2020.
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