The Indian equity market has witnessed a decent recovery with the benchmark Nifty rallying more than 85 percent since its multi-year low levels seen in March. This sharp uptick has been largely driven by strong foreign capital inflows into emerging markets, especially India.

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Low-interest rate environment, massive liquidity infusion by global central banks to counter the economic distress caused by COVID-19 pandemic, better and faster than expected corporate earnings among others are the reasons behind Foreign Portfolio Investors (FPI) and Foreign Institutional Investors (FII) pumping huge money into Indian markets.

FPIs have infused around over Rs 1,64,386 crore so far in 2020 in the Indian equity markets. However, they have been net sellers in the debt market with over Rs 81,000 crore worth of outflows (including Debt-VRR), according to data available on NSDL.

"Our market buoyancy in the last quarter has been because of the fantastic FPI inflows. The most obvious reason is the corporate earnings which have been better than expected," said Vaibhav Sanghavi, co-CEO at Avendus Capital Alternate Strategies.

The FPI inflows were positive in equities for the month of January and February with Rs 12,123 crore and Rs 1,820 crore, respectively. However, after the spread of the pandemic, the nation went into lockdown and the economic activities came into a standstill.

The FPIs pulled out Rs 61,973 crore in March and Rs 6,884 crore in April. Markets also reacted sharply with both the benchmarks Sensex and the Nifty hitting multi-year low levels in March.

With the easing of lockdowns in the subsequent months and businesses opening up gradually, the FPIs again started infusing liquidity in Indian equities, thus stabilizing the markets.

During the period from May to August, FPI inflows stood more than Rs 91,000 crore with August recording a massive Rs 47,080 crore-worth inflows.

It was only in September after that, when FPIs turned negative and sold Indian equities worth Rs 7,783 crore, the data showed.

In October, FPI invested over Rs 19,500 crore while in November, FPI inflows crossed Rs 60,000 crore in equities. In December so far, FPI inflows amount to more than Rs 56,100 crore.

Going ahead, analysts expect FPI inflows to continue, but with a little lower intensity as compared to the previous quarter.

(Edited by : Jomy)

First Published:Dec 29, 2020 4:16 PM IST