How has been the trend of FPI flows in the month of February 2020 so far in the first three weeks of the month?

The trend started around the Union Budget and the flows from foreign investors has been virtually unrelenting since then. Foreign portfolio investors infused a total of Rs.24,965 crore into the Indian equity and bond markets in the first 3 weeks of February 2020 with just one more week to go for the conclusion of the month.

This was possible after better-than-expected quarterly results in the third quarter ending December 2020 as well as the markets being supported by a surprisingly brave and reformist Union Budget. These helped to boost investor sentiments. In terms of break-up, it is predominantly equity investing with FPIs pumping in Rs.24,204 crore into equities and a very paltry amount of Rs.761 crore into debt; although it is good see debt in positive.

This compares very favourably with the FPI infusion of Rs.14,649 crore in Jan-20. In the month of January, the heavy FPI selling in the last week of the month ahead of the budget changed the sentiments strongly in favour of the bears. However, a positive budget that announced reforms and a liberal fiscal deficit, went a long way in changing the perception of Indian markets in the month of February 2020.

The sentiments turned more decisively positive after the International Monetary Fund or the IMF estimated that India would be the fastest growing large economy in CY 2021. Large economies are classified as economies with GDP over $2 trillion. The big triggers have come in the form of a pro-growth budget. However, from a market perspective one must not forget that it was also helped by the MSCI rebalancing of weights.