Economic Survey 2022-2023 highlights that on account of the strong macroeconomic fundamentals of the Indian economy and the improvement in market risk appetite from time to time, India remains an attractive investment destination.
The World Bank’s India Country Director, Auguste Tano Kouame, credited India’s strong macroeconomic fundamentals for the “remarkably resilient” economy.
Economic Survey 2022-2023 highlights buoyant performance of the Indian capital markets in the past year, driven by increased contribution of Small and Medium Enterprises (SMEs) and greater participation of domestic institutional and retail investors.
The Survey observes that India’s capital markets had a good year despite global macroeconomic uncertainty, unprecedented inflation, monetary policy tightening, volatile markets, etc. The number of SMEs coming with IPOs was almost double compared to the FY 2022 (till November 2021), and the total funds raised by them were almost three times the funds raised by them in the same period last year.
Global economic factors, such as inflationary pressures, monetary tightening by central banks and recessionary fears in Advanced Economies, exerted pressure on FPIs to sell in Indian markets. Further, investors were also sitting on gains from Indian stocks that could be realised to offset losses elsewhere.
However, on account of the strong macroeconomic fundamentals of the Indian economy and the improvement in market risk appetite from time to time, assets under custody (custodial holdings of FPIs reflecting the total market value of the holdings) witnessed an increase despite the outflows driven by global factors. The total assets under custody with FPIs increased by 3.4 per cent at the end of November 2022 compared to November 2021.
The overall net investments by Foreign Portfolio Investors during FY23 registered an outflow of Rs 16,153 crore at the end of December 2022 from an outflow of Rs 5,578 crore during FY22 at the end of December 2021, with both the equity segment and the debt segment witnessing net FPI outflows.
Investments by Domestic Institutional Investors (DIIs) acted as a countervailing force against FPI outflows during recent years, rendering the Indian equity market relatively less susceptible to large scale corrections. Net DII inflows and net investment by mutual funds in equities were observed during FY23 (until November 2022).
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