Foreign portfolio investors or FPI are expected to end the current fiscal year with net investments of about of Rs 1.8 to 2.2 lakh crores i.e. $28 to 35 billion for FY2018 as compared to Rs 95,600 crores i.e. $ 15 billion in the first half FY18 and Rs 48,400 crores i.e. $7 billion in FY17.
According to Karthik Srinivasan, Senior Vice President and Group Head – Financial Sector Ratings said that the FPI investments in the present fiscal have been motivated by the debt segment, which actually received a net inflow of Rs 1.17 lakh crores during eight months of FY 2018 with positive net inflows across all months. Mr. Srinivasan further added that due to healthy inflows, the application of the FPI investment limit in G-secs and corporate debt has increased in the current fiscal regardless of an augmentation in the permissible investment limits. However, the equity segment also witnessed a net outflow of FPI investment during the August and September months amongst concerns on earnings growth, rising valuations and slowing GDP growth.
ICRA Experts forecasted that though the improvement in FPI limits has strengthened the pace of inflows into the debt market, the trend is anticipated to be reasonable in the coming months, given the high usage levels for G-sec and corporate bonds. The recent rate hike by the United States Federal Reserve Bank in December 2017, the ongoing balance sheet adornment by the US Government and the passage of the Tax Cuts and Jobs Act of 2017 have pushed up the treasury yields in the US. So, this has contributed to a point in yields for the Indian debt securities that would help to maintain their relative attractiveness for international investors as the debt segment is to register net FPI inflows of Rs. 1.5 to 1.6 lakh crores in FY18.