Flight of capital: Indian market receives record foreign investment in November; equities skyrocket

Foreign Institutional Investors invested heavily in the Indian markets in November 2020. With five more days to go in the month, FII investors have bought equities worth Rs 53,167 crore so far in November, which is the highest monthly investment received in history. While the total FII so far in the month stands at Rs 58,082 crore, the highest share is received by equities. On 24 November, the net investment in Indian equities was Rs 4,889.55 crore, according to the National Securities and Depository Limited (NSDL). Total FII inflow in the month of October was Rs 21,826 crore.

What led to heavy FII inflow?

“There are several factors that are driving this flight of capital to India. India is projected to be one of the few heavyweight economies that will quickly overcome the pandemic’s adverse effects. Besides China, India is the only economy that is largely expected to show GDP growth in the next year, which sends a bull signal for Indian equities,” Utkarsh Sinha, Managing Director, Bexley Advisors, a boutique investment bank firm, told The Outlooker Online.

The end of the Trump era in the US signals a shift away from the far-right economic policies of the last administration, which will shake up some of the capital that was tied in long term US equities and see it being allocated elsewhere, Sinha added. India is a key destination for such capital, not just for its return potential, but also due to its socio-political stability and the maturity of its capital markets, he further said.

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Meanwhile, FIIs in India got severely affected in the month of March 2020, when the governmnet had announced a strict nationwide lockdown to arrest the spread of the coronavirus pandemic. The foreign institutional investors had pulled out a record Rs 1.18 lakh crore in only one month of March. Further, the investors remained net sellers in April and May as well, however, the intensity of withdrawal decreased.