FPI, FDI and corporate bond market boom

New Delhi: Covid-19 has severely affected investment in economies across the world. Because of which the balance of demand and supply in all economies has deteriorated. India too has not remained untouched by this economic shock. Although the result of continuous efforts by the government, investment in the Indian economy continues to accelerate while the world is reeling under epidemics.

FPI, FDI and the boom in corporate bond market have kept India’s growth story intact even under these difficult circumstances. The boom in investment simply means that investors’ confidence in the strength of the Indian economy remains intact.

Foreign Portfolio Investment (FPI)
In the last two months, October and November, FPIs have risen sharply. One of the main reasons for this is the record rise in FPI through equity, which was the highest FPI inflow in a month. On November 28, 2020, FPI inflows to India amounted to Rs 62,782 crore. During this period, FPI came through equity of Rs 60,358 crore in total investment. While debt and hybrid through FPI of Rs 2,424 crore has come to India.

The record FPI investment data during November, 2020 in the equity category has been provided by National Securities Depository Limited.

Although FPI investment does not directly affect the changing market conditions, the FPI data also shows the total investment and its exit conditions. Withdrawal in India has led to more FPI investment during October-November-2020.

Apart from this, there has been a boom in investment in the equity category from the month of November to the present day. The record for highest FPI inflows was on November 12, with an investment of Rs 11,056 crore on that day.

Foreign direct investment

During the second quarter (July-September) of the financial year 2020-21, there has been a total FDI of $ 28,102 billion in India. Under this, FDI of $ 23,441 billion i.e. Rs 174,793 crore has come in the form of equity. FDI of $ 30,004 billion has come in the first half of the current financial year (as of September -2020) based on the second quarter investment. Which is 15% higher than the same period of FY 2019-20. In terms of rupees, FDI in the form of equity has come to Rs 224,613 crore during this period, which has increased by 23% over the last financial year. The month of August during this period has been quite remarkable on the basis of FDI. This month, FDI of $ 17,487 billion has come in the form of equity. FDI and total FDI investment through equity has been rising in the last few years, which was maximum during the last six years during 2019-20. The main reasons for this boom are FDI reforms by the government, increase in investment facilities, steps taken to facilitate ease of doing business. As a result, FDI inflows into India have increased.

Bond market

Corporate bonds worth Rs 4.43 lakh crore were issued in the first half of FY 2020-21, while corporate bonds worth Rs 3.54 lakh were issued in the same period last year. Which is 25% higher than the previous year. The way corporate bonds have accelerated, it is clear that corporates are now relying on the bond market in place of secured government securities. The move will also reduce the cost of raising capital for the government and corporate. At the same time liquidity is increased by the liberal monetary policy of RBI. Due to this, the yield in the debt market has also decreased.