At the onset of the general elections, no one had anticipated the Narendra Modi-led National Democratic Alliance (NDA) to return to power with a thumping majority. However, market experts kept pointing that the indices were long factoring in a second term for NDA.
Foreign portfolio investors (FPIs) were bullish for sure. Looking back at 2014, in the previous election year FPIs had invested a net of ₹45,803 crore in equity between Janurary to May. Net FPI investments jumped 66% to ₹76,052 crore in equity in the same period this year.
What is different however is the FPIs’ investing appetite for debt. Against, ₹46,119 crore worth of net investments in debt between January and May 2014, FPIs invested a net of ₹676 crore this year. The lower investment is a function of interest rates and exchange rates which make debt less favourable now compared to 2014.
On a ten-year horizon, January-May 2019 was the second best period for FPIs’ net investments in equity after 2013, when FPIs invested a net of ₹83,205 crore in equity. On the contrary, these five months of 2019 were the third worse phase for FPIs’ net investments in debt, after net debt outflow of ₹30,465 crore in January-May 2018, and net debt outflow of ₹5,349 crore in January-May 2016.
Clearly, investment flows endorse that this time around, FPIs are bullish on Indian equity.
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