Rs 82,575 crore: FPI inflows in 2019 highest in Modi Era

At Rs 82,575 crore so far in 2019, foreign funds have sent in the maximum amount of money since the Modi era began in May 2014. FPIs infused Rs 97,350 crore in domestic equities in 2014. However, about Rs 41,000 crore came in between January and M...

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More than half the QIPs were subscribed by FPIs.
Mumbai: The Narendra Modi administration appears to have convincingly won the trust vote of bulge-bracket overseas funds. This year marks the second innings of the Prime Minister with a stronger national mandate – and the biggest investment commitment from foreign funds since he first moved into South Block five summers ago.

At Rs 82,575 crore so far in 2019, foreign funds have sent in the maximum amount of money since the Modi era began in May 2014. Foreign portfolio investments into India so far this year rank the second highest among the emerging markets, next only to China.

The credit for such flows goes to several draw-cards: Qualified institutional placements (QIPs) and offers for sale (OFS), especially from top insurance companies, the biggest corporate tax cuts in India’s history, and better-thanexpected performance of the Indian currency. Unrest in Hong Kong has also helped burnish the allure of Indian-listed assets.

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To be sure, FPIs infused Rs 97,350 crore in domestic equities in 2014. However, about Rs 41,000 crore came in between January and May, while Modi took oath on May 26, 2014. Between 2015 and 2018, the total FPI inflow into equities was Rs 57,656 crore.

“Good demand for QIPs and FPOs, especially for insurers, the rollback of surcharge on FPIs, the tax cut announcement, a betterthan-expected performance of the rupee, and issues in Hong Kong helped attract good FPI inflows in the last few months,” said Gopal Agarwal, senior fund manager, DSP Mutual Fund.

A record transfer of surplus reserves from the RBI in August, allowing the government to frontload expenditures, coupled with the recent corporate tax cut announcement, helped reverse negative investor sentiment.
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Since the budget announcement in July, FPIs had maintained a cautious stance on the Indian equities market. The rollback of a tax surcharge in September has put the FPIs’ focus back on India. Since September 1, FPIs have invested about Rs 31,000 crore.

On September 20, India announced a cut in basic corporate tax rate to 25 per cent from 35 per cent, while tax for new manufacturing companies was whittled down to 15 per cent from 25 per cent. The move is expected to boost corporate earnings and create investment demand.

OFS issues by the promoters of various insurance companies, including the HDFC Group, SBI and ICICI Prudential, were bought by FPIs. So far in 2019, nine companies have raised about Rs 31,000 crore through QIPs. The recent Bajaj Finance QIP has received bids of Rs 42,500 crore against an issue size of Rs 8,500 crore. More than half the QIPs were subscribed by FPIs.

“A large part of the foreign money this year has come from exchange traded funds (ETF) and long-only funds, such as pension funds, which take calls with a 5-10 year view,” said Sanjiv Prasad, co-head, Kotak Institutional Equities.
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