It’s a sweet November for FPI inflows, but will this trend continue? | Economic Times

Mumbai: Economic indicators are still flashing red and share valuations are pricey, but they haven’t stopped global fund managers from pumping record money into Indian equities.Net purchases of shares by foreign investors were worth almost Rs 69,500 crore in November — the highest in a month — as breakthroughs in Covid-19 vaccines, an increase in India’s weight on MSCI indices and Joe Biden’s victory in the US elections reinforced their appetite for riskier emerging market assets. Fund managers and strategists expect flows into emerging markets to continue in December, although at a relatively moderate pace, with the dollar and other developed market currencies expected to remain under pressure.This is on account of easy monetary policies followed by the US Federal Reserve and other central banks.“Money is going into equities because the cost of debt has collapsed,” said Raamdeo Agrawal, chairman of Motilal Oswal Financial Services. “Stimulus money is flowing into the developing market. It will have its own slowdown but it is not a flash in the pan or short-term trend but a structural trend.”Indian stocks received the highest foreign portfolio investor flows among major Asian markets, excluding China, which does not publish the data, in November, helping the Nifty index sprint from the 12,000 mark to 13,000 in only 14 trading sessions during the month.79458378At 21.4 times, the Nifty’s 12-month forward PE is trading at an all-time high and at a 39% premium to its 15-year average.The addition of Indian stocks to MSCI indices partly sparked fresh flows from global funds. FPIs bought shares worth Rs 7,713 crore on Friday as against the daily average of Rs 3,600 crore in November.The National Stock Exchange’s cash segment hit a lifetime high turnover of Rs 1.47 lakh crore in a single day on Friday.Sanjeev Prasad, co-head, Kotak Institutional Equities, said India was a beneficiary of the flows to emerging market equities.“Sentiment is pretty positive for all EMs including India – it is not just India-related flows,” said Prasad. “If you look at performance of EMs, India is up about 8% in dollar terms in the last one month and so is the MSCI EM index. Some other markets have performed even better.”Agrawal of Motilal Oswal said global investors are looking at emerging markets like India and China because Covid-19 has impacted developed markets more.“The main reason that I expect more inflows to Indian markets is that the outlook for the world economy in 2021 is far brighter than this year, while global investors remain extremely underweight on EM equities, including Indian equities,” said Jan Dehn, head of research at Ashmore Group, a London-based investment manager. “It is worth remembering that these inflows were preceded by far larger outflows earlier in the year and for many of the years prior to 2020.”Net flows into emerging markets so far this year are still a negative $28 billion. India has received $15 billion so far this year.