Continuing with their bullish stance on India for the second month, foreign investors have pumped in over Rs 7,600 crore into the country’s capital market in April so far, buoyed by a rate cut by the Reserve Bank.
It follows a staggering inflow of Rs 19,967 crore in the capital markets (equities and debt) last month.
Foreign Portfolio Investors (FPIs) had turned net buyers of equities in March after pulling out a massive Rs 41,661 crore from the market in the previous four months (November to February).
Overall, so far this year, FPIs have invested Rs 7,964 crore in equities, while withdrawing Rs 3,202 crore in the debt markets, resulting into a net inflow of Rs 4,762 crore.
Market experts attributed the huge inflow this month to rate cut by Reserve Bank of India (RBI) in its first monetary policy meet of 2016-17 on April 5.
RBI had reduced the short-term lending rate by 0.25 per cent to over five-year low of 6.5 per cent.
According to the data available with depositories, FPIs invested Rs 3,469 crore in equities till April 7, while they poured Rs 4,152 crore in the debt markets, leading to a total inflow of Rs 7,625 crore.
“Following the recent rate cut by RBI, bond prices have rallied (prices move inversely to rate) which has lead to inflows from FPIs on anticipation of further price appreciation the future,” SAS Online Chief Operating Officer (COO) Siddhant Jain said.
“Also in the recent hike by capital markets regulator Sebi in FPI investment limit for government debt will further lead to more FPI inflows, he added.
Capital inflows by FPIs are often referred to as hot money due to their unpredictability, although the funds continue to remain one of the key drivers of the stock market.