Buoyed by surplus global liquidity, foreign fund inflow into Indian equities touched record levels in November, surpassing the Rs 50,000-crore mark for the first time.
Till November 24, foreign institutional investors and foreign portfolio investors parked a net of Rs 55,552.64 crore in Indian shares — which includes Rs 1.7 lakh crore of buying and Rs 1.14 lakh crore of sales.
The last time foreign funds were buying so heavily was in March 2019, when they had parked a net of Rs 32,371.43 crore in Indian markets.
The current foreign fund inflow into Indian equities is seen as a complete turnaround in just seven months: in March 2020, when the Covid-19 pandemic started to take the steam off economies across the globe, foreign funds had withdrawn a net of a whopping Rs 65,816.70 crore from Indian equities.
The current rally in the markets has been backed by surplus global liquidity owing to stimulus packages pushed out by various governments to battle economic woes arising out of the Covid-19 pandemic.
"The market rally continues on account of global liquidity, parts of which are filling India allocations, though now ETFs form a significant part of that. The real story will play out once governments/central banks turn off the tap," said Anubhav Srivastava, partner, Infinity Alternatives.
Also, reform measures undertaken by the government to revive investment activities in the country have also helped in boosting FII inflow, other analysts add.
Additionally, weaker dollar index and absence of quality value play at reasonable valuations in FPIs' home markets have given FPIs to move more allocation to emerging markets and India, analysts say.
Backed by an unprecedented foreign fund inflow and a weaker dollar, the rupee had rebounded by almost 1% against the US dollar in November and in the intra-day touched the sub-74 level of 73.96 against the greenback. The domestic currency closed at 74.01 against the dollar on Tuesday.