India’s financial services industry is soaking in foreign portfolio investor (FPI) funds.
In the first 15 days of November, FPIs invested 11,452 crore rupees ($1.4 billion) in the sector. That’s nearly 40% of their net equity investments in India in this period, according to National Securities Depository which maintains the country’s capital market data.
India’s financial services sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds, and other smaller financial entities. While commercial banks hold more than 64% of India’s total financial system assets, new entities like payment banks have also been added in recent years.
The fast-moving consumer goods segment has been FPIs’ favorite, too. Up to Rs3,514 crore was pumped into it in the first two weeks of this month. Information technology, with Rs3,005 crore invested in, was another key area.
“FPIs have turned buyers over the last 1-2 weeks despite record valuation premium relative to both MSCI emerging markets and developed markets, deteriorating global growth outlook, and strengthening dollar index,” HDFC Securities said in a report earlier this month.
A stellar performance by Indian banks
In the September quarter, the 12 public sector banks together declared a net profit of Rs25,685 crore, up 50% from a year ago. At Rs32,150 crore, the private sector’s net also saw a considerable rise year-on-yea at 64%.
A fall in provisions and contingencies resulted in this. With bad loans declining progressively, banks now don’t need to set aside as much money as they used to in previous quarters.
“September quarter earnings have been good, in fact, banks have done extraordinarily well. Credit growth is picking up for each and every bank, which means there will be investments. If the capex cycle starts, there will be growth in the future, so these are positive indicators,” Sharad Chandra Shukla, director of Mehta Equities, told Business Insider India.
During the first fortnight of November, the Nifty bank index rose 2.6%.