India Strategy - Risk of volatile FPI equity flows on external sector mitigated by rising FDI by ICICI Securities
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Risk of volatile FPI equity flows on external sector mitigated by rising FDI, primary flows and low vulnerability on ‘current account’; structural rise in household savings into equities is emerging as another counterbalancing force!
CY20 saw strong US$23bn of FPI inflows helped by QE and fiscal stimulus across the world. However, CY21 has seen the inflows dropping to around US$4bn so far. While the overall number is still positive, it hides the volatility seen during the second half of CY21 which saw an outflow of US$3.8bn, driven by the US Federal Reserve’s tapering program and prospects of rate hikes going ahead along with the continued impact of covid.
* Strong FPI primary flows of US$10.7bn in CY21 compared to US$9.8bn in CY20 despite volatility: Despite the increased volatility in the second half of CY21, FPI inflows into primary markets rose above strong inflows of US$9.8bn seen in CY20. FPI inflows into the Indian primary market has seen a rising trend over the past six years
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