FPI Increases, Forex Reserves Decline, and other equity updates

Domestic Equity Through FPI’s Increases to $592 Billion in Q1
Foreign Portfolio Investor (FPI) holdings in domestic equity received a sizable augmentation in valuation in the quarter ended June 2021, with the valuations aggregated at $592 billion (Rs. 44 lakh crore). This particular statistic possesses a 7% increase from the FPI holdings in domestic equity from the preceding quarter, highlighting an ever-expanding and rapidly evolving resurgence in foreign investments, especially post the devastating second wave which derailed the nation’s economy and hindered economic rebounding.

According to the Morningstar report which publicised these statistical findings, FPI holdings in the previous quarter totalled to $552 billion (Rs. 41 lakh crore), and received a considerable increase for this particular quarter primary due to powerful net inflows, as well as, consistent performances yielded by Indian equity markets.

In addition to hedge funds, sovereign wealth funds as well as offshore insurance companies, total FPI holding in Indian equity was largely propagated through the remunerative offshore mutual funds in this particular quarter. Quoting the Economic Times, “For the quarter ended June 2021, FPIs were net buyers to the tune of USD 0.68 billion compared with the net inflow of USD 7.64 billion was recorded during the quarter ended March 2021.”

India’s pernicious second wave of Covid-19 evoked negative turns by foreign investors on Indian equities, with net assets in India valued at $1.29 billion and $0.39 were sold by FPIs in April and May respectively, however, as the situation stabilised, FPIs inputted and pumped $2.36 billion in assets.

The Morningstar report also proclaimed that FPIs have regained circumspect and vigilance in their domestic equity holdings in India in the month of July, and have opted to patiently expect for stronger economic rebounding, as well as being attentive of the uncertain possibilities of a potential third wave in the nation.

Forex Reserves Decline From Lifetime High, by $2.10 billion
Following an exalted all time high of $621.464 billion in the previous week, India’s foreign exchange reserves experienced declined by $2.099 billion to possess valuations of $619.365 billion in the week ended August 13th, according to the weekly reports published by the Reserve Bank of India (RBI).

The primary contributors for this decrease in valuation are decreases experienced by the quotations of gold as well as core currency assets. Foreign currency assets (FCA) are an integral contributor to national foreign exchange reserves, and experienced a depreciation of $1.358 billion to become valued at $576.374 billion, in the same reporting week. FCAs comprise the effect of escalation/degradation of non-US currencies, however are expressed in dollar terms.

In addition to declines in FCA reserves, gold reserves, special drawing rights (SDR) with the IMF, as well as the reserve position with the aforementioned international organisation, experienced declines of $720 million, $7 million and $14 million respectively.

Taliban’s New Regime Evokes National and International Investor Uncertainty
Vacillation and investor perturbance serves as one of the most devastating contributors of negative impacts on local, regional as well as international markets. Investor uncertainty can be epitomised through the recent Taliban insurrection and overthrowing of the Afghan government, with nations across the world withdrawing investments in the tempestuous country, and prospects for investments in Afghanistan at the present being abundant. India’s most prominent indices, Sensex and Nifty, have reflected somewhat stagnant and variating performances in the previous week, since the new regime’s installation.