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Indian growth story continues as is demonstrated by the trends in FPI, FDI and Corporate Bond Market flows

IBEF:  December 21, 2020

India continues to grow on the path of economic development and build strong beliefs of investors in the strength and resilience of the Indian economy, as it demonstrate growth trends in foreign portfolio investment (FPI), foreign direct investment (FDI), and the corporate bond market flows.

According to the finance ministry investors continue to trust the Indian growth story amid despite coronavirus pandemic.

The ministry said in a statement, “The Indian economy's investment optimism has been boosted by the government's regular and aggressive involvement, despite being struck by a global pandemic.”

Foreign Portfolio Investment (FPI)

October 2020 and November 2020 have seen a large rebound in FPI inflows, predominantly due to increased equity inflows.

Inflows from the FPI stood at Rs. 627.82 billion (US$ 8.53 billion) as of November 28, 2020. Of this, equity inflows amounted to Rs. 603.58 billion (US$ 8.21 billion) and FPI net investment in debt and hybrid instruments amounted to Rs. 24.24 billion (US$ 329.52 million).

Since the National Securities Depository made available the FPI data, the inflows in November 2020 was the highest ever invested in the equity segment.

In the equity market, there was a growing pattern of positive net flows in November 2020.

On November 12, 2020, the highest inflow in total FPI investment was recorded, with a single day high of Rs. 110.56 billion (US$ 1.50 billion).

Foreign Direct Investment (FDI)

In the second quarter of FY21, total FDI inflows amounted at US$ 28.10 billion, of which equity inflows were US$ 23.44 billion.

In the first half of FY21, this boosts FDI equity inflows to US$ 30 billion, a 15% increase on y-o-y basis compared to the same period of FY20.

August 2020 was a significant month as the country recorded US$ 17.49 billion FDI equity inflows.

The ministry said, “The initiatives taken by the government focused on the favourable FDI policy reforms, investment facilitation, and the ease of doing business have resulted in increased FDI inflows into the country.”

Corporate bond market

In the first half of FY21, the overall issuance of corporate bonds stood at Rs. 4.43 trillion (US$ 60 billion), a 25% increase compared Rs. 3.54 trillion (US$ 48 billion) in the same period last year. Government securities narrowing spread demonstrates the improving risk profile of corporate bonds. In addition, due to the monetary easing and liquidity infusion by RBI, the cost of funds also moderated for both the government and the company, thereby reducing yields in the different segments of the debt markets.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.