The net Foreign Portfolio Investment (FPI) inflow in India stood at $29.35 billion in FY18 (Apr-Feb) as against $7.6 billion in the entire FY17. The robust FPI inflow to India is basically attributed to two factors: first, positive global economic outlook and second, robust macro-economic environment with business amiable reforms in domestic market.

However, we believe that FPI inflow in India is expected to be lackluster in FY19 with the rising policy rates in advance economies. These countries are normalizing their monetary policy with the improvement in domestic economic outlook. Moreover, US federal government has set an ambitious plan to have public expenditure worth of $4.17 trillion in FY18, which is around $20 billion more than the previous year. This development will lead to capital flight from emerging markets, which have been the primary recipients of cheap money since Quantitative Easing (QE). Therefore, global financial market is expected to be unfavorable for the emerging markets (in terms of capital flows) including India in FY19. Considering this challenging global environment, we believe that the net FPI investment in India would remain at a low level, around $10 billion in FY19.