Consecutive selling for 30 sessions in a row does not mean overseas investors have not written off India, a senior analyst has pointed out. Despite the ongoing exodus, this month saw an unprecedented number of applications for FPI registrations at about 40–50, said Manoj Purohit, partner and leader, financial services tax, tax and regulatory services at BDO India LLP.
"All thanks to SEBI’s recent relaxation to NRIs, permitting them to participate up to 100% and announcing measures for ease of entry and operations in India," he said.
Earlier this year, markets regulator Securities and Exchange Board of India allowed up to 100% aggregate contribution by non-resident Indians, Overseas Citizens of India and Resident Indians in corpus of FPIs operating out of International Financial Services Centre, like Gujarat's GIFT City. The move is meant to encourage NRIs and OCIs to participate in Indian market.
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Though FPI community had been very cautious about Indian market in the last couple of months, shifting their allocation to other countries like China, India still stands on better footing as compared to other markets.Manoj Purohit, Partner, BDO India
The optimism is in contrast to the recent trend of foreign money leaving Indian shores in droves. This week alone, foreign portfolio investors sold equities worth Rs 19,637.6 crore, as per NSE data. Over the 30-session selling streak, this figure reached Rs 1.45 lakh crore.
The major factors behind Indian market's strength are political certainty, long-term growth, better yields, substantial government capex, and Reserve Bank of India's vigilant approach while announcing rate cuts to curb inflation, the analyst said.
"The offshore participants are optimistic that the RBI will adopt a balanced approach to ensure the cost of raising funds is under control and is made easily accessible to India Inc. in the upcoming quarter’s announcement," he said.
In its October policy announcement, the Monetary Policy Committee kept the repo rate unchanged at 6.5%, but changed policy stance to 'neutral' and set the tone for rate cuts in coming days. The panel will convene next on Dec. 4–6.
Donald Trump returning to power in the US also bodes well for Indian market, "considering the strategic partnership between the two countries", Purohit said.
The election result in US will boost the economic and mutual businesses and other foreign trade policies, making India "more lucrative for foreign investments", he said. "We may see the upside in FPI’s inflows in equity and debt segment turning in green in the coming few trading cycles."
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