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FIIs made highest monthly buying in November in the last 2 decades

The inflow increased considerably especially after the end of the election in the United States and weakness in the dollar index.
Nov 21, 2020 / 10:53 AM IST

India seems to be a strong destination for foreign institutional investors to park billions of dollars, especially when the country is on a recovery path with declining COVID-19 infections and the western world is seeing a strong second wave of coronavirus infections.

FIIs inflow seems to be unstoppable as they have consistently bought in every session in November, barring Laxmi Pujan day when they sold only Rs 78.5 crore worth of shares.

In the current month so far, they have net bought Rs 45,732 crore worth of Indian equities, the highest inflow in a month at least in the last two decades. They net bought Rs 1.34 lakh crore of shares in the current financial year.

The inflow increased considerably especially after the end of the election in the United States and weakness in the dollar index.

Another major reason behind such a large inflow was the expected stimulus worth trillions of dollars from central banks to revive economies that are hit hard by the COVID-led lockdown. United States is also going to announce its second stimulus to sustain economic growth, though it may take some time amid discussion between Republican and Democratic parties.

India has consistently been showing improvement in the economy and is expected to get back into green in the second half of FY21 with anticipation of strong growth in FY22, while September quarter earnings growth was largely better-than-expected and raised hope for strong double-digit growth in FY22.

"FII flow will continue with ebbs and overseas money will find India attractive over many years to come. Any global dislocation will surely temporarily disrupt this flow but eventually, it will re-start," Vikas Dawra, Joint MD & CEO – Investment Banking at YES Securities told Moneycontrol.

"I am very confident that Indian businesses are on the path to becoming more transparent, better governed, better regulated and more in touch with investors. What is still lacking is the global scale and vision. Hopefully, we will one day see Indian entrepreneurs creating businesses to serve global markets and not just India," he said.

Hemant Kanawala, Head of Equity at Kotak Mahindra Life Insurance Co, too, believe the FII flow will continue in coming years.

"In response to economic slowdown on account of COVID-19 infection, governments and central banks of developed countries announced large stimulus amounting to $21 trillion. As large part of this was done by USA, the US dollar has been weakening since April. This has led to flow of capital from USA to emerging markets," he explained.

"Because of economic reforms announced by the government and attractive valuation relative to other emerging markets, India has seen disproportionately large FII flows since April this year. We believe that stimulus in developed markets will continue in 2021, which will support FII flows into emerging markets and India," he further explained.

As a result of consistent inflow, the benchmark indices surged 70 percent from March 23's low, while the Midcap rallied 73 percent and Smallcap climbed 83 percent from the same day as the market could be pricing in expected growth well in advance.

Earlier IT, Pharma and Energy stocks were leaders of the rally, now in the last couple of weeks, banking & financials, infrastructure, metals, FMCG and auto stocks were in the driver's seat.

On the contrary, domestic institutional investors including mutual funds have taken the advantage of this rally by booking profits and also turned a little bit of cautious due to sharp rally.

DIIs net sold over Rs 32,600 crore of shares in November so far, in addition to Rs 17,300 crore of selling in the previous month. But mutual funds have been net sellers for the sixth consecutive month as they sold Rs 13,467.93 crore of shares in the current month, taking total outflow to over Rs 52,000 crore in six months.
Sunil Shankar Matkar
first published: Nov 21, 2020 10:53 am

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