Bombay Stock Exchange building BSE
Bombay Stock Exchange Reuters file

Riding on a series of economic reforms carried out by the central government, foreign portfolio investors (FPIs) have invested a net Rs 7,850 crore into the market in September.

The news has come as a major relief for the government as FPIs were net sellers in July and August. They pulled out around Rs 30,000 crore from the stock market, the Indian Express reported. Amid the economic slowdown, FPIs withdrew Rs 12,419 crore in July and Rs 17,592 crore in August.

Last week, as a much-needed tonic for the private sector, Finance Minister Nirmala Sitharaman announced a 10 percent cut in the corporate tax and issued a clarification that increased tax surcharge will not be applicable on capital gains arising from the sale of any security, including derivatives, in the hands of FPIs.

Moreover, market regulator Securities and Exchange Board of India also simplified KYC requirements for FPIs and granted them permission to conduct the off-market transfer of securities.

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A view of National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).IANS

According to the latest NSDL data, FPIs injected Rs 7,850 crore in equities and pulled out a net Rs 136 crore from the debt markets between September 3 and September 27, with total inflows of Rs 7,734 crore in the current month.

In contrast, the FPIs sold heavily in July and August with the net outflows from both equity and debt stood around Rs 3,003 crore and Rs 5,871 crore respectively. Following the news of government announcing the rate cuts, Sensex also soared to historic one-day levels, gaining 2,997 points in two days.

India Ratings and Research argued that the US Federal Reserve's policy rate cut by 25 bps and the ECB's decision to resume asset purchases is expected to trigger FPI inflows in India. 

But the geopolitical tension in West Asia combines with downsides risks to domestic economic growth and tepid demand could be some negatives for the economy in the near term. India Ratings said, "In the long term, a shrinking current account surplus in key exporting economies including China coupled with the muted household consumption will continue to weigh on FPI flows."