FPI activity muted in August so far, offload ₹2,034 crore in Indian equities; July inflow lower than June

Even though FPIs recorded their fifth straight monthly buying in the Indian markets last month, it was slightly less that ₹47,148 crore in June – which was the highest monthly FPI inflow since August 2022. Sustained FPI inflows have powered the uptick in the blue-chip Nifty 50 and S&P BSE Sensex, driving the benchmarks to record highs in July. 

Commenting on the FPI activity, Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services says, ‘’After sustained buying for three months, FPIs have turned sellers in the Indian market…Sharp spike in the US 10-year bond yield above four per cent is a near term negative for capital flows to emerging markets.”

‘’A significant change in FPI strategy is that they have started buying IT stocks, which they have been selling earlier. This explains the strength in IT stocks recently,” added Dr. V K Vijayakumar.

Between March and July, FPIs have been net buyers of Indian equities in each of the five months, purchasing shares worth ₹15,530,800 crore and triggering a 14.15 per cent rise in Nifty 50 index.

Analysts attributed strong macroeconomic fundamentals, steady earnings as well as concerns over recovery in China as the key drivers of foreign inflows into India. Earlier in the week, global brokerage Morgan Stanley upgraded its view on India to “overweight” from “equal weight” and termed it the most-preferred among emerging markets (EMs) on macro-stability and positive earnings outlook.

‘’FPI became net buyers with an inflow of $11.9 billion in the April-June quarter compared to an outflow of $14.4 billion in the corresponding quarter of the previous year. Among the sectors, financial services, automobiles, FMCG, and healthcare saw increased interest from foreign investors,” said the Finance Ministry in its monthly economic review for June 2023.

What FPIs bought in July

FPIs purchased equities worth ₹11,51,400 crore in the financial services sector in July, after buying ₹19,22,900 crore worth of shares in June. FPIs were also the net buyers in the sector during April and May. The revival in FPI interest in financials follows outflows of ₹29,99,300 crore of shares in the sector in fiscal 2023.

‘’During the last three months, FPIs have been sustained buyers in the Indian market having invested a cumulative amount of ₹1,37,603 crore. If the US bond yields remain high FPIs are likely to continue selling or at least refrain from buying. FPIs continued to buy autos, capital goods and financials,” said Geojit’s Dr. V K Vijayakumar.

“Earnings growth in banks remained steady and asset quality continued to improve, while non-banking financial companies (NBFCs) demonstrated healthy disbursement momentum,” said analysts at Motilal Oswal Financial Services in their interim review of June quarter numbers.

Updated: 05 Aug 2023, 04:50 PM IST