Overseas investors have pumped in close to Rs 16,500 crore (USD 2.5 billion) into Indian capital markets so far in March, after pulling out massive funds in the preceding four months.
Market experts attributed the huge inflows to continued hopes that Reserve Bank of India (RBI) would bring down the monetary policy rate at its first policy meet of 2016-17 on April 5.
Additionally, a lower retail inflation at 5.18 per cent in February provides more room for RBI to act, they added.
“The interest rate cut on small savings plan has been a welcome note to the market,” said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas.
According to the data available with depositories, Foreign Portfolio Investors (FPIs) invested Rs 15,660 crore in equities during March 1-23 and another Rs 816 crore in the debt markets, leading to a net inflow of Rs 16,480 crore (USD 2.5 billion).
FPIs have turned net buyers of equities in March after pulling out a massive Rs 41,661 crore from the market in the previous four months (November to February).
Capital inflows by FPIs are often referred to as hot money due to their unpredictability though the funds continue to remain one of the key drivers of the stock market.
In 2015, FPIs had brought in a net Rs 17,806 crore in equities and Rs 45,856 crore in bond markets.