India seems to be a trusted and strong destination for foreign institutional investors (FIIs) to invest billions of dollars, especially when the country is on a recovery path with declining COVID-19 infections while the western world is witnessing a strong second wave of coronavirus infections.
FIIs inflow seems to flow in unceasingly 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. The inflow boosted considerably especially after the end of the election in the United States and a drop 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 have suffered due to the COVID-led lockdown. The 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
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 the flow of capital from the 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.
India has steadily displaying 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.