Jul 14, 2017 09:54 AM IST | Source:

Financial services, auto, oil & gas among top 5 sectors on radar of FPIs; here’s why

Around $10,110 mn were poured in the debt segment in Q1FY18 compared with outflows of $611 mn in the corresponding period last year.

The first quarter of FY18 has been marked by significant foreign portfolio investments (FPI) in the country. India has witnessed FPI inflows of nearly $ 12,231 mn during the April-June quarter of FY18 compared to the inflows of $ 1,590 mn in the corresponding period last year, said a report from CARE Rating.

This is a very positive factor for the balance of payments as it comes at a time when the trade deficit is widening and there is considerable uncertainty on the flows of software receipts and remittances given the changes that are taking place in the developed countries and Gulf region.

The domestic rating agency further added that this growth in FPIs in can be attributed to increasing in the inflows into the debt segment.

Around $10,110 mn were poured in the debt segment in Q1FY18 compared with outflows of $611 mn in the corresponding period last year.

On the other hand, equity segment witnessed a marginal decline of 3 percent in foreign inflows during the same time period.


The higher inflow of FPI into the debt segment may be attributed to the enhanced limits offered to FPIs in the GSec segment as well as better utilization in the corporate debt market, said the Care Rating report.

Further, the interest rate environment has been favourable for such investments as rates are relatively higher in India compared with the developed world.

Also a relatively stable currency – the rupee is still one of the better-performing currencies, provides comfort to investors to remain in this market.

Sector-wise FPIs (Asset Under Custody as on June 15)

A total of $450.4 bn has been invested in various sectors as on June 15, 2017. Out of the total amount invested in India so far of $ 450 bn, around 86 percent is in equity and the balance in debt said the report.

The financial services sector has the largest share of around 23 percent in the total FPIs inflows as on June 15’2017, Software Services (8%), Sovereign (7%), Automobiles (6%) and Oil and gas (6%).


On the other hand, sectors like healthcare services, Coal, Retailing, Hotels, Consumer durables, Hardware technology, realty, media etc. have a negligible share in the total FPI inflows.

The top 5 sectors accounted for almost 2/3rd of total equity flows while in the case of debt, sovereign and financial services accounted for a little over this level. Clearly, there is a concentration in the flow of FPI to specific sectors.

The report clarified that typically flows are directed in sectors which are faster growing and relatively open in terms of laws and regulation. Sectors dealing with natural resources are more vulnerable to changes in policy stance and could impact these investments.
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