India’s strong fundamentals may spur potential yield-chasing portfolio inflows and FDIs

Global excess liquidity is expected to continue to be accommodative in the near future. Thus high-yielding Indian rupee is likely to gain from India’s strong fundamentals that might spur potential yield-chasing portfolio inflows and foreign direct investments as market concerns regarding a Fed rate hike in September have eased following the U.S. August non-farm payrolls data release, said Scotiabank in a research note.

Foreign investors, in August alone, bout net USD 1.46 billion of Indian shares, while they reduced their holdings in local bonds by USD 441 million due to a rise in India’s July retail and wholesale inflation.

According to The Economic Times, a local media, the global private equity funds are in discussions to pick up about 25 percent stake in an Indian company for around USD 150-200 million, stated Scotiabank. Meanwhile, Financial Times reported earlier that a Canadian investor would pour up to USD 6 billion into India by 2022, noted Scotiabank.

Reserve Bank of India governor Raghuram Rajan had mentioned in August that the central bank is attempting to prevent the Indian rupee from becoming too volatile by regularly purchasing dollars when there are inflows from foreign investors.