• Mon. May 29th, 2023

Rupee appreciation and favorable valuations are driving investment in REIT equities; Check April data here


May 1, 2023

Foreign portfolio investors (REITs) pumped Rs 11,630 crore into Indian stock markets in April on the back of reasonable stock valuations and the appreciation of the rupee.

This came after REITs injected a net sum of Rs 7,936 crore into shares in March, mainly through massive investments in Adani Group companies by US firm GQG Partners. However, if GQG’s investments in Adani Group are taken into account, the net flow is negative.

Going forward, the outlook for REIT flows is likely to remain volatile due to the tight monetary policy of the US Federal Reserve. Rising interest rates by 25 basis points at the next policy meeting, as indicated by US Fed minutes, could impact REIT investments, said Sonam Srivastava, founder of the firm. investment advisory firm Wright Research.

However, the stability of the Indian economy relative to other emerging markets and reasonable valuations could continue to attract REITs to Indian equities, she added.

According to data from custodians, REITs started the current fiscal year on a positive note and invested Rs 11,630 crore in Indian stocks in April.

During the first half of April, REITs showed strong buying activity, indicating renewed optimism in the Indian stock market. However, this optimism was dampened in the third week of the month due to concerns about high interest rates and weak economic indicators in the United States.

They once again became aggressive buyers in the last days of April, and the influx of foreign capital is likely to continue in the longer term, said Anand Dalmia, co-founder and CBO of Fisdom.

Srivastava said the main factors behind the inflow during the month include the stabilization of the global scenario, the moderation of apprehensions regarding the banking crisis in the United States and Europe, the reasonable valuation of Indian stocks after the consolidation and the India’s potential to generate healthy mid-term returns. – long-term horizon.

In addition, another important macro factor that swung the FPI approach is the appreciation of the rupee. The local currency, which hit a low of 82.94 to the dollar at the end of February this year, has now appreciated to 81.75, said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Moreover, India’s current account deficit is declining, and if this trend continues, the rupee could appreciate further. REITs are likely to bring more inflows to India in this environment, he added.

Apart from equities, REITs invested Rs 805 million in the debt market during the review period.

“When the rise in rates stops, money will start moving from debt to equities to fight inflation. India presents a better opportunity among developed markets and other emerging markets,” said Divam Sharma, founder of Green Portfolio PMS.

With this, REITs have so far withdrawn Rs 14,580 crore from equities in 2023 and invested Rs 4,268 crore in debt markets during the period.

Data from mid-April on REIT inflows revealed that the financials, auto components and information technology sectors were particularly attractive to foreign investors, Fisdom’s Dalmia said.

Overall, REITs withdrew a net sum of Rs 37,631 crore from Indian equities in 2022-23 thanks to aggressive rate hikes by central banks around the world and a record Rs 1.4 lakh crore in 2021 -22. Prior to these outflows, REITs invested a record Rs 2.7 lakh crore in equities in 2020-21 and Rs 6,152 crore in 2019-20.

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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)

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