India received Rs 1.6 lakh crore ($26 billion) as
investment from Foreign Institutional Investors in 2014 on account of high
interest rate and Modi government’s reform agenda.
The inflow by Foreign Institutional Investors in
2014 has significantly contributed to taking the cumulative net investments
into the Indian debt markets since being allowed over two decades ago, in
November 1992, to Rs. 2.6 lakh crore.
The latest round of inflow came after they pulled
out around Rs. 51,000 crore ($8 billion) in 2013.
These investors got re-christened as FPIs or Foreign
Portfolio Investors in 2014 under a new regulatory regime that promises to make
it easier for them to invest in India.
This huge investment inflow, which belies commonly used nomenclature of ‘hot money’ because such funds can be withdrawn anytime, has come at a time when foreign companies have been mostly reluctant on their FDIs (Foreign Direct Investments) that carry a common perception of being longer-term in nature.
Besides, FIIs have poured a net of Rs. 98,000 crore
in equities. While inflows into bonds have been significantly higher than the
equities in 2014, the overseas investors had kept away from the debt market in
2013 and had pulled out a net sum of Rs. 51,000 crore in that segment due to
weakness in the Indian currency.
Interestingly, most of the inflows this year into
Indian debt market has gone into government securities.
Market experts said that overseas investors remained
bullish on the Indian debt markets throughout 2014, barring the month of April.
The sentiments had been bullish even during the first half of the year, mainly
on hopes that a strong reform-oriented government will come to power at the
Centre.
These positive sentiments continued after a new
government took over in May and got a further boost from the reform measures
announced subsequently.
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