FPIs may pump $35bn into markets this fiscal

Mumbai : The domestic capital markets are expected to receive overseas investments worth upto Rs 2.2 trillion, or USD 35 billion, in the ongoing fiscal – which marks an over four-fold increase over the preceding year, according to ratings agency ICRA. Foreign portfolio investors (FPIs) pumped in Rs 484 billion (USD 7 billion) in 2016-17, ICRA said in a report published on Friday.  “We expect a net inflow to be around Rs 1.8-2.2 trillion (USD 28-35 billion) for 2017-18 compared to Rs 956 billion (USD 15 billion) in the first half of this fiscal and Rs 484 billion (USD 7 billion) in 2016-17,” the report added. According to ICRA Senior VP Karthik Srinivasan, FPI investments in the current fiscal are being driven by the debt segment, which received a net inflow of Rs 1.17 trillion during the April-November period of 2017-18 fiscal with positive net inflows across all months. “Supported by healthy inflows, the utilisation of the FPI investment limit in G-secs and corporate debt increased in the current fiscal despite an enhancement in the permissible investment limits,” Srinivasan said.  “The equity segment, however, witnessed a net outflow of FPI investment during the August and September amidst concerns on earnings growth, rising valuations and slowing GDP growth.” he added. The report noted that while the enhancement in FPI limits has reinvigorated the pace of inflows into the debt market, the trend is expected to moderate in the coming months, given the high utilisation levels for G-sec and corporate bonds. However, it observed the recent rate hike by the US Fed, the ongoing balance-sheet trimming by the US Government and the passage of the Tax Cuts and Jobs Act of 2017 have pushed up treasury yields in the US. “This has in-turn contributed to a spike in yields for Indian debt securities, which would help to maintain their relative attractiveness for international investors,” it said. ICRA expects the debt segment to register net FPI inflows of Rs 1.5-1.6 trillion (USD 24-26 billion) in 2017-18.