The huge buying comes after foreign fund outflow in the 2018-19 fiscal, where FPIs turned net sellers to the tune of Rs 44,500 crore.

Mumbai: The massive foreign fund flows into the Indians markets over the past couple of months have baffled investors. Many are now questioning the colour of the money that is buying into Indian equity when political and micro economic uncertainties loom large.

Foreign portfolio investors (FPIs) pumped in Rs 33,980 crore in March—the largest monthly inflow in the market’s history. And in the first five trading sessions of April, they have pumped in Rs 8,634 crore more into the markets.

The huge buying comes after foreign fund outflow in the 2018-19 fiscal, where FPIs turned net sellers to the tune of Rs 44,500 crore.

Some experts feel that some large funds are betting on the election outcome where the NDA is likely to come back to power. The market has made record highs on the back of this buying even as domestic funds have turned net sellers.

“I am a little nervous about it. This looks like money which comes into different markets basically to play specific events and it may go from one market to the other quite fast. Right now, it doesn’t look like the money is here for good,” said the Singapore-based fund manager Samir Arora, Founder and Fund Manager, Helios Capital in an interview to a business television channel.

Some feel that Sebi, in order to attract overseas dollars in the wake of falling rupee in 2018, diluted Know Your Cleint norms for foreign investors and allowed creation of a new category of Eligible Foreign Investors (EFI), and many FPI are now investing under this route.

“These flows are anything but genuine foreign investors. It is those who don't want to give their identity, KYC, for regulatory purposes who are using the EFI structure from Ahmedabad,” a market expert said.

Those EFIs opting for relaxed guidelines--meaning who don’t wish to give details of ultimate foreign beneficiary owner--must retain a part of their original investments in India for a pre-defined period.

EFI can be a single person entity willing to retain a part of original investment in India on a non-repatriation basis. They can take out any or all or profits and on repatriation and keep up to 25 per cent of original investments for three years.

“Why these investors, currently a very large proportion, are willing to lock up funds in India but don't wish to give full KYC?” an expert asked.

Some feel that improved outlook on India is triggering this buying. Improvement in the country's macro outlook as well as expectations of the formation of a stable government at the Centre brought foreign money back into the Indian markets, analysts said.

“Foreign funds believe that there is high likelihood of a stable government. Also, globally the liquidity situation has eased, which means higher inflows for emerging markets," said Naveen Kulkarni, Head of Research, Reliance Securities.