FPI equity assets at 22-month high, overcoming October setback

Interestingly, a day after the revival on 1 December, Nifty surpassed its previous high of 20,222.45 on 15 September, to reach a new peak of 20,291.55. It continued to rise, setting a fresh record at 20,961.95 on 6 December.

FPI equity assets rebounded from a low of $629 billion at October end, marked by outflows of $2.95 billion, aligning with the stock market falling to 18,838 on 26 October. In September, when the market hit a high of 20,222.45, FPIs sold net shares worth $1.77 billion.

In addition to the cash purchases in November, FPIs started covering their bearish bets on index futures contracts (Nifty, Bank Nifty and Finnifty) from 175,698 cumulative short contracts to 22,954 cumulative long contracts on 6 December.

“Revival in FPI flows since November is pretty impressive, borne by resumption of buying and covering bearish index positions, which were the second-largest (net shorts were 196,378 contracts on 22 March),” UR Bhat, co-founder, Alphaniti Fintech, said. “With election results behind us and resumption of the Israel-Hamas hostilities, more cues could be provided at the end of RBI rate setting committee’s policy meeting on 6 December .”

The RBI raised rates by 250 basis points from 4% in May 2022to 6.5% in February to tame inflation, but has kept the rate constant with a cautious stance. Markets will watch out for the RBI to ease its stance to “neutral” from “withdrawal of accommodation”.

“FPI sentiment has turned bullish, given the jump in their equity assets and now they will support the rally, which might see a few pauses here and there,” said Rajesh Palviya, SVP, research, at Axis Securities. “It’s also possible that the upcoming Budget might offer some sops for foreign investors,” However, Palviya did not specify the nature of offerings.

So far in FY24, FPIs invested $19.2 billion, after having sold shares worth $23.56 billion in the previous two fiscal years.

Out of the $674.66 billion in equity assets for the fortnight ended 30 November, financials accounted for $216 billion or 32%, followed by information technology (9.75% at $65.79 billion) and O&G and consumables at $56.69 billion ((8.4%). FPIs invested $454 million in capital goods sector, $424 in consumer services, $256 million in auto and auto components segment and $239 in IT in the fortnight according to NSDL data.