FPIs invest a record Rs57,000 crore in India’s secondary markets in March

Foreign investors poured a record Rs57,000 crore into India's secondary markets in March, buoyed by that BJP's election win in four of the five states that went to poll in February and the centre's promise of "bold, reformist policies".

Net investment by FPIs in the capital markets, including in equity and debt stocks, as of March 2017 stood at a little over Rs49,000 crore.

FPIs invested a net Rs56,000 crore in equities in the 2016-17 financial year while they pulled out Rs7,000 crore from the debt market during the year.

FPIs infused a net Rs31,327 crore in equities in March and another Rs25,617 crore in the debt segment, translating into a combined inflow of Rs56,944 crore ($8.7 billion), depository data showed.

This was the highest net inflow by FPIs in a single month since 2002 when segregated data for equities and debt were available with Sebi.

The latest inflows follow a net investment of Rs15,862 crore in equity and debt in February. Prior to that, FPIs had pulled out a total of over Rs80,000 crore from October to January.

Foreign investors are hoping on a weak rupee while the Reserve Bank of India is not so keen on curbing the strength of the rupee against the dollar.

Traders appear emboldened to aggressively short dollar / rupee in spot markets, even as the rupee hit its strongest against the dollar since October 2015 at 64.7650, to become the best performer among Asian peers.

But a continued rupee rally carries economic risks, given it could threaten continued FPI investment in Indian markets. They argue that a strong rupee will also retard India's ex[ports.

Based on positioning in markets, traders are looking at 64.80 as the next support level which was breached on Monday and then 63.50, the 200-day moving average and the strongest since July 2015.

The shorts are profitable for traders given they can deploy rupees in short-term investments such as commercial paper that yields more than 6 percent.

The rupee rose to its highest since May 2014, when Modi was overwhelmingly elected in the midst of a market rally.

The rupee's ascent has been fuelled by a net $8.85 billion in foreign investments into debt and equities in March - the highest monthly amount since at least 2002 - after Modi's party won key state elections.