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Re Rising Amid Unabated FII Inflows

Author: Dasari Sreenivasa Rao/Wednesday, December 2, 2020/Categories: Exclusive

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Re Rising Amid Unabated FII Inflows

Modi sarkar terms it as ‘growth story,’ attributes reason to investments by foreign funds, corporate bond inflows & economy recovery

The home currency further strengthened on Tuesday (December 1) as foreign institutional investments (FIIs) continued to pour in funds. Further, on the back of weakness in the US dollar, rupee moved up in the interbank foreign currency (forex) market. The rupee rose 54 paise and was trading at Rs 73.51 per dollar from its previous close of Rs 74.05 per dollar. It had opened at Rs 73.95 per US dollar. The latest GDP data for the July-September, (Q2) second quarter of FY-21 showed better than anticipated narrowing of the contraction in GDP, which has boosted the market sentiment. Union Finance Ministry laid down the growth numbers in foreign institutional investment (FII), foreign portfolio investments (FPI) and corporate bond issuances to show a positive momentum in the Indian economy.

A statement from the finance ministry said: “The economy growth story in India continued to expand and this was indicated by FPI, FDI and Corporate Bond Market inflows. It also underlines the beliefs of investors in the strength and resilience of Indian economy.”  Only on Friday (November 27), the home currency snapped its five-day gaining streak and settled by appreciating 17 paise at Rs 74.05 against the greenback. The continued inflows of FIIs and encouraging GDP data further boosted the domestic stock market as well. Data released by National Statistical Office (NSO) indicated that the GDP on a year-on-year (y-o-y) during the second quarter contracted by 7.5 per cent from 23.9 per cent contraction in the preceding quarter.

November clocks highest FII inflows, DII outflows

The investor sentiment has been upbeat as the FII inflows continued. It’s estimated that net purchasing of FIIs in November was over Rs 65,000 crore, the highest monthly inflow ever. However, the Indian equity market in November witnessed a significant volume of outflows as the net sales by domestic institutional investments (DII) were at $5.9 billion as against $8.3billion inflows by FIIs. The increased volumes of FII inflows pushed Nifty-50’s market capitalization (mcap) to all-time highs at Rs176 lakh crore on BSE. Nifty mcap rose 13 per cent when compared to December 2019 level. However, Nifty Mid-cap 100’s market cap is still down 12 per cent from the peak, although it is above December 2019 level.

According to Motilal Oswal’s report, 45 of Nifty-50 stocks gained last month. So far in 2020, 31 Nifty stocks delivered positive returns. Further, as many as 182 stocks in BSE-200 category rose in November 2020, with 116 stocks recorded more than 10 per cent gains m-o-m. This led to a broad-based rally on the bourses. The 2020 witnessed gains in 120 stocks in BSE-200 category, while 45 stocks rose more than 30 per cent. The last two months, October and November, recorded a significant resurgence in FPI inflows, driven primarily by equity inflows resulting in the highest ever FPI inflows for a month for India, added the statement by finance ministry.

As of November 28, FPI inflows were at Rs 62,782 crore. Of this, equity inflows amounted to Rs 60,358 crore, while FPI net investment in debt and hybrid was to the tune of Rs 2,424 crore, it said. Regarding the equities segment, the inflows in November 2020 is the highest amount of money invested ever since FPI data has been made available by the National Securities Depository Ltd. Generally, FPI flows influence the Indian market sentiment a lot. Investments via FPI route are measured in terms of net inflows and outflows. The domestic market recorded net FPI inflows in October and November 2020.

Easing Cost of Funds

The total FDI inflows in Q2 (July-September 2020) were $28,102 million including FDI equity inflows of $23,441 million or Rs 174,793 crore. This takes the FDI equity inflows during the financial year 2020-21 upto September 2020 to $30,004 million which is 15 per cent more than the corresponding period of 2019-20, said the Finance Ministry statement. The FDI equity inflows were Rs 2,24,613 crore, 23 per cent more than the previous period.

“Further, the cost of funds also moderated for both the government and the corporate, on the back of RBI’s monetary easing and liquidity infusion, thereby bringing down yields in the various segments of the debt markets,” said the statement.  In H1 FY21, the total corporate bond issuances amounted to Rs 4.43 lakh crore, 25 per cent higher than Rs 3.54 lakh crore in the same period last year. The narrowing spread with G-Secs stands testimony to the improved risk perception of corporate bonds.

Sebi extends Covid-related reliefs for trading members, depositories

The market regulator Sebi enhanced the deadline for several relaxations of regulatory requirements for trading and clearing members along with depositories in the wake of the coronavirus pandemic. The timeline for internal and system audit for half year ended September have been extended till December 31, said a circular from Securities and Exchange Board of India (Sebi).  “Stock Exchanges/Clearing Corporations and Depositories are directed to bring the provisions of this circular to the notice of their members and participants respectively and also disseminate the same on their websites,” said Sebi in the circular.

Depositories can submit their internal audit report for the half year ended September 30, 2020, by the end of December. Further, trading and clearing members can now submit by December 31 their half yearly net worth certificate as on September 30 and the cyber security and cyber resilience audit for half year ended on September 30 can be done till January 31, 2021, stated Sebi in the circular. The capital market regulator further stated that the decision has been taken in view of the prevailing situation due to Covid-19 pandemic and representations received from the stock exchanges.

The writer is a business journalist with 27 years of experience

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