Rs 2,74,034 crore Foreign Portfolio Investments (FPI) inflows in Indian equity markets

Financial Year (FY) 2020-21 witnessed strong Foreign Portfolio Investment (FPI) inflows into the Indian equity markets of Rs 2,74,034 crore, thus, reflecting steadfast confidence of foreign investors in the fundamentals of the Indian Economy.

Up to 1^st April 2021; source: NSDL

The robust FPI flows came on the back of faster than expected economic recovery supported by multiple tranches of innovatively designed stimulus packages. The Government and regulators had also undertaken major policy initiatives directed at improving ease of access and investment climate for FPIs in the recent past. These include simplification and rationalisation of the FPI regulatory regime, operationalisation of the online Common Application Form (CAF) for the purpose of registration with SEBI, allotment of PAN and opening of bank and Demat accounts etc. The increase in aggregate FPI investment limit in Indian companies from 24% to the sectoral cap has been a catalyst for increase in weightage of Indian securities in major equity indices, thus mobilising massive equity inflows, both passive and active, into Indian capital markets.

The growth forecast for India in FY 2021-22 have been pegged above 10% by the World Bank, IMF and several global research organisations underscoring that India will continue to remain an attractive investment destination in the near future.

The Measures taken by the Government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country as India has attracted total FDI inflow of US$ 72.12 billion during April to January, 2021. It is the highest ever for the first ten months of a financial year and 15% higher as compared to the first ten months of 2019-20 (US$ 62.72 billion).

The trends show that the FDI equity inflow grew by 28% in the first ten months of F.Y. 2020-21 (US$ 54.18 billion) compared to the year ago period (US$ 42.34 billion).In terms of top investor countries, ‘Singapore’ is at the apex with 30.28% of the total FDI Equity inflow followed by U.S.A (24.28%) and UAE (7.31%) for the first ten months of the current financial year 2020-21.

Japan has been leading the list of investor countries to invest in India with 29.09% of the total FDI Equity inflows during January, 2021, followed by Singapore (25.46%) and the U.S.A. (12.06%).

The Computer Software & Hardware has emerged as the top sector during the first ten months of F.Y. 2020-21 with 45.81% of the total FDI Equity inflow followed by Construction (Infrastructure) Activities (13.37%) and Services Sector (7.80%) respectively.

As per the trends shown during the month of January, 2021, the consultancy services emerged as the top sector with 21.80% of the total FDI Equity inflow followed by Computer Software & Hardware (15.96%) and Service Sector (13.64%).

These trends in India’s Foreign Direct Investment are an endorsement of its status as a preferred investment destination amongst global investors