Investments from foreign institutional investors (FIIs) have been pouring in continuously owing to positive factors such as industry-friendly Budget-2021, ongoing Covid vaccination, focus on infrastructure, capital expenditure drive, disinvestment, etc. Despite Covid-19 pandemic, foreign portfolio investments (FPI) indicated new highs and continued to pour into the Indian equities after the Union Budget for FY22 announced on February 1. According to a latest data from NSDL, net FPI inflows into capital market in February were Rs 20,593 crore and Rs 39,000 crore since January.
The sectors that received FII investments include private banks, consumer, FMCG and IT as corporate India demonstrated an encouraging growth after lifting of the lockdown restrictions in third quarter (Q3). Analysts predict positive foreign inflows in Q4 as well in line with the trend so far as the Budget has been pro-growth with privatisation gaining ground.
The Union Budget-2021 focused on infrastructure development and capital expenditure. Further, the ongoing Covid vaccination also further propelled the growth curve. As per the Budget announcement, the Centre has included amendments to various financial legislations in the Finance Bill, 2021 to permit debt financing of InvITs and REITs by Foreign Portfolio Investors. In the Budget speech 2021-22, it has been announced that debt financing of InvITs and REITs by Foreign Portfolio Investors will be enabled by making suitable amendments in the relevant legislations. Analysts said that it'll pave the way for easy access of finance to InvITs and REITs thus augmenting funds for infrastructure and real estate sectors.
Speedy economic recovery
Industry body PHD Chamber of Commerce and Industry is upbeat on future course of economic growth. A speedy economic recovery is underway on the back of higher job creation, strong stock market, healthy GST collections and elevated manufacturing PMI levels in January. The industry body said that nine out of the 10 indicators of QET of economic and business activity tracked by PHD Chamber of Commerce and Industry shown positive trends in January. Out of all the indicators, unemployment rate has shown highest sequential improvement of around 28 per cent in January 2021 over December 2020.
However, e-Way Bill generation eased and declined to 62.9 million in January 2021, when compared to 64.1 million in previous December 2020. As per the data, January 2021 QET performance is in sync with the performance of December 2020, while it is better as compared to October and November 2020.
Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry, in a statement said that "economic and business indicators such as unemployment rate, stock market, GST collections, manufacturing PMI, forex reserves, railway freight, merchandise exports, exchange rate and passenger vehicle sales have shown positive sequential growth in January 2021 as compared to December 2020. The expectations of a positive GDP growth in Q3 and Q4FY21 are becoming strong. At this juncture, to continue the recovery momentum of economic and business activity, immediate policy attention is required towards credit access to industry and services sectors. Credit disbursement should be the top most priority at this juncture by the banking sector."
PHD Chamber of Commerce and Industry further stated that the focus should be on ensuring the provision of hassle-free disbursements of loans vis-a-vis enhanced liquidity for MSMEs, especially in rural sectors. The industry body called for lower interest rates for consumers and businesses, and lesser compliances for MSMEs vis-a-vis ease of doing business at the ground level.
REITs, InvITs debt securities
The Centre included amendments to various financial legislations in the Finance Bill-2021 to permit debt financing of InvITs and REITs by Foreign Portfolio Investors. In the Budget speech 2021-22, Union Finance Minister Nirmala Sitharaman announced that debt financing of InvITs and REITs by Foreign Portfolio Investors will be enabled by making suitable amendments in the relevant legislations."
This will pave the way for easy access of finance to InvITs and REITs thus augmenting funds for infrastructure and real estate sectors.
As part of the Finance Bill, 2021, amendments have been proposed in the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992, with consequential amendments in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 to confer the power to Pooled Investment Vehicles (defined to include AIFs, REITs, InvITs etc.) to borrow and issue debt securities. The necessary notifications would be issued by the concerned regulators after the Finance Bill is passed by Parliament, the ministry statement said.
The Finapolis Network