Foreign investors continue to believe in the India growth story, notwithstanding disruptions anticipated to the economy in the wake of the GST implementation, as can be seen from the spike in dollar inflows during the first three months (Q1) of 2017-18.
Foreign institutional investors (FIIs/FPIs) ended Q1 on a high note, with the net inflows (debt and equity) coming in at $12.2 billion, up sharply from $1.6 billion in the corresponding period last year. Debt contributed the lion's share, of $10.1 billion in Q1 with equity investments at $2.1 billion.
In the corresponding quarter last year, FIIs pulled out $600 million from the debt market, according to Teresa John, economist at brokerage Nirmal Bang Institutional Equities.
In June this year, FIIs invested $3.99 billion in debt and $600 million in equity, marking a significant increase from their position last June that saw net outflow of $400 million, according to her.
However, the first trading day of July resulted in FIIs turning net sellers of Indian equities worth Rs 805 crore, according to provisional data published by the National Stock Exchange (NSE).
On Tuesday, stock markets gave up their modest early morning gains and were trading with losses. At around 12.25 pm, the BSE Sensex was down 36 points at 31,184, led by Hero Motocorp, Dr Reddy's and Axis Bank, while stocks bucking the trend were Reliance Industries and Adani Ports.
It would be interesting to see FII inflows into debt and equity this month, in the context of sentiments and trading being influenced by GST.