Disappointment With HDFC Bank Spurred January FPI Outflows, Says Helios Capital's Samir Arora

January's foreign portfolio investment outflows can be linked to people's disappointment with HDFC Bank Ltd. Despite this setback, Helios Capital's Samir Arora expressed optimism about Indian markets.

He pointed out a significant improvement in the relative position of Indian markets, attributing increased investment inflows to India to the frustration observed in Chinese markets.

"People's frustration in Chinese markets has been driving investment to India," said Arora, founder and fund manager at Helios Capital Asset Management (India) Pvt.

In January, foreign investors turned net sellers, influenced by a surge in U.S. Treasury yields and fading hopes of a U.S. Federal Reserve interest rate cut in March. Overseas institutional investors offloaded $3,096 million, or Rs 25,744 crore worth of stocks in January. This is the highest outflow in one year, according to data from the National Securities Depository Ltd.

There is significant interest in India. However, investors seem to be grappling with concerns about whether it is too late to enter the Indian market and whether valuations are currently high, according to the fund manager.

Fintech companies are expected to sustain their strong performance, especially considering the robust performance of India's digital payment system compared to other countries, Arora noted.

The recent directives from the Reserve Bank of India for Paytm Payments Bank are viewed as a wake-up call for the entire fintech industry, he said.

The central bank found major supervisory concerns and persistent non-compliance from Paytm's Payments Bank. On Jan. 31, it restricted the payments bank from undertaking any fresh deposit or credit transactions from Feb. 29.

After this, Paytm operator One97 Communications Ltd. said it would be working only with other banks and not its own payment banks.

The restrictions raised concerns about the security and continuity of financial services provided by Paytm, the Confederation of All India Traders' National President BC Bhartia and Secretary General Praveen Khandelwal said in a statement on Sunday.